Professional Documents
Culture Documents
SUMMARY OF PROBLEMS
PROBLEM NO. 1 Composition of trade and other receivables
PROBLEM NO. 2 Computation of adjusted accounts receivable
(including preparation of adjusting entries)
PROBLEM NO. 3 Audit of accounts receivable and related accounts
(including preparation of adjusting entries)
PROBLEM NO. 4 Audit of allowance for doubtful accounts
(including preparation of adjusting entries)
PROBLEM NO. 5 Analysis of accounts receivable and related accounts
PROBLEM NO. 6 Audit of accounts receivable and related accounts
(including preparation of adjusting entries)
PROBLEM NO. 7 Analysis of notes receivable and related accounts
PROBLEM NO. 8 Audit of notes receivable and related accounts
(including preparation of adjusting entries)
PROBLEM NO. 9 Audit of notes receivable and related accounts
PROBLEM NO. 10 Analysis of notes receivable and related accounts
(including preparation of adjusting entries)
PROBLEM NO. 11 Loan impairment
PROBLEM NO. 12 Theory
91,500
10,000
10,000
55,000
166,500
50,000
15,000
20,000
1,500
5,000
91,500
2)
Love M. Do
Sales returns
Accounts receivable
92,000
92,000
Strawberry Fields
None
5)
6)
Girl Corporation
Sales
Accounts receivable
40,000
40,000
160,000
Let It Be Corp
Cash
Accounts receivable
124,000
160,000
124,000
7)
Hey Jude
None, this is misposting only in the SL. However, the customers' ledger should be adjusted.
8)
9)
Yesterday Corp
None, this is misposting only in the SL. However, the customers' ledger should be adjusted.
Requirement No. 2
Unadjusted balance
Add (Deduct) adjustments:
No. 1
No. 4
No. 5
No. 6
Adjusted balance
2,020,000
(92,000)
(40,000)
(160,000)
(124,000)
1,604,000
Per Books
442,500
238,500
61 to 90 days
Over 90 days
117,200
85,400
15,000
1
2
3
4
5
6
7
Adjustments
(16,400)
15,000
(21,000)
(12,000)
(1,200)
(18,000)
(1,500)
Per Audit
387,400
4
5
6
7
(12,000)
(1,200)
(18,000)
(1,500)
205,800
(21,000)
2
3
8
15,000
(21,000)
(1,378)
16,400
16,400
2 Accounts receivable
15,000
Allowance for doubtful accounts
Erroneous recording of recovery from written off account
15,000
21,000
21,000
4 Net sales
Accounts receivable (<60 days)
Unrecorded credit memo
12,000
5 Net sales
Accounts receivable (<60 days)
Unrecorded employee discount
1,200
6 Net sales
Accounts receivable (<60 days)
18,000
Inventory
Cost of sales
Goods out on consignment erroneously billed
12,000
1,200
18,000
13,000
13,000
7 Freight out
Accounts receivable (<60 days)
Unrecorded freight-out
1,500
1,378
1,500
1,378
2,058
2,344
3,220
7,622
9,000
117,200
64,400
7,622
Adjustment
1,378
Aging ratio
64%
18%
8%
AR Balance
960,000
270,000
120,000
Rate
Allowance
1.00%
9,600
2.50%
6,750
5.00%
6,000
5%
75,000
20.00%
15,000
3%
45,000
35.00%
15,750
2%
100%
30,000
1,500,000
80.00%
24,000
77,100
Requirement No. 2
Doubtful accounts expense
Allowance for doubtful accounts
22,300 *
22,300
27,300
320,000
347,300
292,500
54,800
77,100
22,300
209,000
1,500,000
(1,380,200)
(31,000)
297,800
Requirement No. 2
Allowance for doubtful accounts, 1/1/12
Doubtful accounts expense - 2012 (see computation below)
Accounts written off - 2012
Recovery of accounts written off - 2012
Allowance for doubtful accounts, 12/31/12
7,600
30,000
(31,000)
4,200
10,800
AR writen-off
26,000
29,500
30,000
85,500
Recoveries
2,150
3,750
3,600
9,500
30,000
Net
23,850
25,750
26,400
76,000
76,000
3,800,000
2.00%
GL/SL
837,900
(9,000)
(6,100)
11,000
833,800
60
387,800
61 to 90
307,100
(9,000)
(6,100)
387,800
11,000
318,100
balance
387,800
318,100
83,700
44,200
833,800
Rate
1%
2%
5%
25%
Allowance
3,878
6,362
4,185
11,050
25,475
55,495
(30,020)
25,475
35,795
6,100
(21,020)
(14,920)
20,875
Requirement No. 2
Adjusting journal entries:
1) Allowance for doubtful accounts
Accounts receivable - over 120 days
To write off definitely uncollectible accounts
91 to 120
over 120
89,800
53,200
9,000
9,000
11,000
21,020
6,100
11,000
21,020
83,700
44,200
902,500
308,000
Requirement No. 2
Note receivable from sale of plant due on 4/1/13
Note receivable from sale of land (see no. 1)
Current portion of long-term receivables
Requirement No. 3
Note receivable from sale of plant (P4,000,000 x 12% x 9/12)
Note receivable from sale of land (P2,800,000 x 11% x 6/12)
Accrued interest receivable, 12/31/12
Requirement No. 4
Note receivable from sale of plant:
P6,000,000 x 12% x 3/12
180,000
P4,000,000 x 12% x 9/12
360,000
Note receivable from officer (P1,600,000 x 10%)
Note receivable from sale of equipment (P637,600 x 12% x 9/12)
Note receivable from sale of land (P2,800,000 x 11% x 6/12)
Total interest income for 2012
4,000,000
2,000,000
637,600
57,384
2,000,000
1,600,000
694,984
2,800,000
594,500
2,000,000
594,500
2,594,500
360,000
154,000
514,000
540,000
160,000
57,384
154,000
911,384
2,205,500
6,500,484
503,105
(400,000)
103,105
Principal
200,000
200,000
200,000
600,000
Interest (4%)
24,000
16,000
8,000
Total
PVF (14%) PV, 1/1/15 PV, 12/31/15
224,000
0.8772
196,493
216,000
0.7695
166,212
189,475
208,000
0.6750
140,400
160,056
503,105
349,531
EI (14%)
NI (4%)
70,435
24,000
48,936
16,000
25,524
8,000
23
Interest income - 2015 (P503,105 x .14)
200,000
200,000
200,000
70,435
96,895
(46,435)
50,460
349,540
400,000
182,476
217,524
Requirement No. 2
AC
503,105
349,540
182,476
-
Profit
over (under)
Sales - over
Reported
Should be
Interest income - under
Reported
Should be (refer to amortization schedule)
Net misstatement
2,005,900
1,500,000
0
156,000
Requirement No. 3
2014 profit overstated (see no. 2)
2015 profit understated (interest income under)
Reported
Should be (refer to amortization schedule)
Net misstatement
12/31/14
12/31/15
12/31/16
12/31/17
12/31/18
341,180
341,180
341,180
341,180
341,180
1,705,900
Interest (13%)
156,000
131,927
104,724
73,984
39,265
Principal
185,180
209,253
236,456
267,196
301,915
505,900
(156,000)
349,900
RE, 12/31/15
over (under)
349,900
0
131,927
Requirement No. 4
Amount reported under current assets
[P1,705,900 - (P341,180 x 2)]
Should be (refer to amortization schedule)
Net misstatement of WC, 12/31/15 - over (under)
Amortization schedule:
Date
Payment
3.5172
3.5172
(131,927)
217,973
1,023,540
236,456
787,084
CA
1,200,000
1,014,820
805,567
569,111
301,915
-
2/28
3/29
8/30
9/4
11/1
11/4
Notes receivable
Accounts receivable
25,000
Notes receivable
Loss on discounting (P25,250 - P24,960)
Notes receivable - discounted
Interest income (P25,000 x .06 x 2/12)
24,960
290
25,000
25,000
250
6,200
Notes receivable
Interest receivable
Interest income
4,200
6,200
1,400
2,800
500
40,000
Notes receivable
Cash
500
40,000
8,120
8,120
26,031
25,000
26,031
25,000
24,000
2,031
26,031
6,200
6,200
42,437
40,500
1,937
800
400
80
1,200
80
400
400
12,014
1/1
2/28
3/29
8/30
9/4
11/1
11/4
12/27
12/31
12/31
12/31
Adjusted trade NR, 12/31/12
25,000
24,960
(6,200)
4,200
(40,500)
8,120
(26,031)
(25,000)
24,000
6,200
42,437
(1,200)
48,000
Composition:
Robinson (P70,000 - P30,000)
Tripper (received PDC on 11/1)
Adjusted notes receivable-trade, 12/31/12
40,000
8,000
48,000
Notes:
1) NR from Pepper - collected on 12/31/12
2) NR from Anna - accepted equipment in full settlement on 12/27/12
3) NR from Julia - non-trade
2,800
800
3,600
480
1,937
250
6,267
10,000,000
130,900
(500,000)
9,630,900
Amortization schedule
Date
1/1/11
12/31/11
12/31/12
12/31/13
12/31/14
12/31/15
EI (11%)
1,059,399
1,065,933
1,073,186
1,081,236
1,089,346
826
Requirement No. 3
Carrying amount, 12/31/12 (see schedule)
Less PV of expected cash flows:
12/31/14 (P4M x 0.8116)
12/31/16 (P4M x 0.6587)
Loan impairment (bad debt expense)
NI (10%)
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
Disc. Amort.
59,399
65,933
73,186
81,236
89,346
9,756,232
3,246,400
2,634,800
5,881,200
3,875,032
C.A.
9,630,900
9,690,299
9,756,232
9,829,418
9,910,654
10,000,000
D
B
A
D
D
D
C
B
B
A
D
B
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
38,700
4,000
36,000
1,800
40,100
2,750
3,840
13,000
1,375
15,400
100
111,904
990,000
346,000
566,000
677,904
600
2,800
2,800
397,000
37,000
400,000
311,102
125,104
944,000
669,600
280,400
270,798
23,602
5,000
6,500
16,352
1,000
1,000
1,000
B
35,002
4,500
40,000
2,000
38,000
1,000
10,750
250
20,000
500
113,302
1,910,000
344,000
1,566,000
713,950
4,000
4,000
5,200
400,000
3,000
405,200
200,000
108,750
948,000
665,000
282,400
264,798
15,000
7,250
9,000
11,000
2,250
4,000
500
C
34,402
5,000
42,000
2,100
40,000
500
2,840
8,500
1,125
24,600
113,950
910,000
350,000
606,000
679,302
5,200
5,200
4,000
363,000
43,000
363,000
108,750
111,102
950,000
661,000
285,000
270,000
17,602
5,500
6,000
17,000
1,750
3,000
2,000
D
35,502
5,500
38,000
1,900
39,900
1,000
3,740
4,250
16,000
900
112,802
940,000
356,000
584,000
678,802
2,800
1,200
1,200
360,000
40,000
368,200
308,750
94,750
952,000
664,400
287,000
264,000
18,400
7,750
3,000
14,000
1,500