PRTC - FIRST PREBOARD (SOLUTION GUIDE)

FEBRUARY 5 - 6,2011
KEY ANSWERS (SET B)
(see DETAILED SOLUTION ON NEXT SHEET)

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
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50

AP
A
D
C
D
B
A
C
D
A
B
B
D
D
A
D
B
C
A
A
B
B
C
A
D
B
C
A
B
B
D
D
A
B
C
A
C
B
B
A
B
C
B
D
B
A
B
D
B
B
C

PRTC FIRST OPEN PREBOARD - SET B

AUDITING PROBLEMS
FEBRUARY 6,2011
SUGGESTED SOLUTION - SET 2 STARTS AT PROBLEM NO. 6
PROBLEM 1 - MANILA CORPORATION

ITEM (ERROR)
A
B
C
D
E
F

INVENTORY
OVER (UNDER)
(180,000.00)
200,000.00
150,000.00
(400,000.00)
250,000.00
(160,000.00)
(140,000.00)
1-C

COS
OVER (UNDER)
180,000.00
(200,000.00)
0.00
400,000.00
(250,000.00)
160,000.00
290,000.00
2-A

PROFIT
OVER (UNDER)
(180,000.00)
(100,000.00)
0.00
200,000.00
250,000.00
(160,000.00)
10,000.00
3-B

PROBLEM 2 - MORNING CORPORATION

6-D
SALES PROCEEDS
CARRYING AMOUNT, 02.28.11
CA AMOUNT 01.01.11 (P180,000-168,750)
DEPRECIATION - 2011 (P180,000X.25X2/12)
GAIN (LOSS) ON SALE
7-A
TRADE IN VALE
CARRYING AMOUNT, 09.01.11
CA AMOUNT 01.01.11 (180,000-67500)
DEPRECIATION - 2011 (P180,000X.25X8/12)
GAIN (LOSS) ON TRADE-IN
8-B
MACHINE 1 SOLD 02.28
MACHINE 2 DESTROYED 12.01
MACHINE 3 TRADED IN 09.01
MACHINE 4
MACHINE 5 - ACQUIRED 02.28
MACHINE 6 - ACQUIRED 09.01
MACHINE 7 - ACQUIRED 12.01
ADJUSTED BALANCE, 12.31.11
RECORDED (DEBITS - CREDITS)

11,250.00
(7,500.00)

112,500.00
(30,000.00)

SHOULD BE
OVER (UNDER)
9-C
10 - A
MACHINE
MACHINE
MACHINE
MACHINE
MACHINE
MACHINE
MACHINE

1
2
3
4
5
6
7

DA
180,000.00
180,000.00
180,000.00
180,000.00
396,000.00
216,000.00
432,000.00

FRACTION
2/12
11/12
8/12
12/12
10/12
4/12
1/12

DEPRECIATION
7,500.00
41,250.00
30,000.00
45,000.00
82,500.00
18,000.00
9,000.00
233,250.00

11 - C
FAIR VALUE
CA, 12.10
COST
ACCUMULATED DEPR.
INCREASE (DECREASE)
TO BE RECOGNIZED IN

MACHINE A
84,000.00
100,000.00
20,000.00
80,000.00
4,000.00
OCI

12 - B
PROFIT OR LOSS
OTHER COMPREHENSIVE INCOME (OCI)
COMPREHENSIVE INCOME
13 - B
SALES PROCEEDS
LESS CARRYING AMOUNT 07.01.11
CARRYING AMOUNT 12.31.10
DEPRECIATION UP TO 07.01 (38000/2 X 6/12)
GAIN ON SALE OF MACHINE B

38,000.00
(9,500.00)

14 - A
MACHINE A
(84000 / 4)
MACHINE B
(38000 / 2 X 6/12)
MACHINE C
(80000 /4 X 6/12)
TOTAL DEPRECIATION - 2011
15 - B

MACHINE 1

FAIR VALUE
CA 12.31.10
PREVIOUS CA
DEPRECIATION - 2011
INCREASE (DECREASE)
TO BE RECOGNIZED IN
PROBLEM 4 - EVENING CORPORATION
16 - C
COST OF LAND - 2006
2007 COST TO BUILD ROAD
2007 MINE IMPROVEMENTS
TOTAL 2006- 2007 COST
LESS RESIDUAL VALUE
COST SUBJECT TO DEPLETION
DIVIDE BY TOTAL ESTIMATED RESERVES
2009 DEPLETION PER TON
DEPLETION FOR 2009 (5000 X 1.30)
17 - B
ORIGINAL COST TO BE DEPLETED
LESS 2009 DEPLETION
REMAINING DEPLETABLE AMOUNT, 1.01.10
2010 MINE IMPROVEMENTS
NEW COST TO DEPLETE
DIVIDE BY REMAINING EST. RESERVES, 1/1/10
(4,000,000-5,000 + 3,000,000)
2010 DEPLETION PER TON
DEPLETION FOR 2010 (1,000,000 X P0.78)
18 - D
BUILDING COST (2008)
LESS: RESIDUAL VALUE
ORIGINAL COST TO BE DEPRECIATED
LESS 2009 DEPRECIATION (5,000XP0.31)
REMAINING DEPRECIABLE AMOUNT, 1.1.10
2010 NEW BUILDINGS
NEW COST TO DEPRECIATE
DIVIDE BY REMAINING EST. RESERVES (SEE NO. 17)
2010 DEPRECIATION PER TON
DEPRECIATION FOR 2010 (1,000,000 X P0.21)

61,000.00
84,000.00
(21,000.00)
63,000.00
(2,000.00)
OCI

19 - B
NEW COST TO DEPLETE, 01.01.10
LESS 2010 DEPLETION
REMAINING DEPLETABLE AMOUNT, 01.01.11
2011 MINE IMPROVEMENTS
NEW COST TO DEPLETE
DIVIDE BY REMAINING EST. RESERVES,01.01.11
(6,995,000-1,000,000)
2011 DEPLETION PER TON
DEPLETION FOR 2011 (P2,500,000 X P0.21)
20 - A
DEPRECIATION FOR 2010 (P2,500,000 X P0.21)
PROBLEM 5 - WEEKEND CORPORATION
21 - B
PRESENT OF NOTE RECEIVED (95,000,000 X .675)
LESS CARRYING AMOUNT OF PATENT, 05.01.11
CARRYING AMOUNT, 01.01.10
AMORTIZATION UP TO 05.01.11 (P3,150,000/15X3)
GAIN ON SALE OF PATENT
22 - D
NOTE RECEIVABLE FROM SALE OF PATENT (P3,375,000X14% X8/12)
INSTALLMENT CONTRACT
01.01 TO 03.31(P7.2M X .13 X 3/12)
04.01 TO 12.31(P5.4 X .13 X 9/12)
TOTAL INTEREST INCOME - 2011
23 - B
INSTALLMENT CONTRACT RECEIVABLE, 12.31.10
LESS PRINCIPAL PAYMENT RECEIVED, 03.31.11
BALANCE, 12.31.11
LESS PRINCIPAL PAYMENT TO BE RECEIVED, 03.31.12
NONCURRENT PORTION
24 - B
CA, 05.1.11
AMORTIZATION OF DISC. ( 05.01 TO 12.31 P3,375,000 X .14 X 8/12)
NONCURRENT PORTION
25 - C
ACQUISITION COST

2,450,000.00
(70,000.00)

234,000.00
526,500.00

DIVIDENDS RECEIVED (750K X 2)

SHARE OF PROFITS (7,040,000 X .25)
CARRYING AMOUNT, 12.31.11
PROBLEM 6 - DAVAO COMPANY (START OF SET B)
26 -A
PURCHASES / TGAS
LESS MI, 12.31
COST OF SALES
ADD GROSS PROFIT (220,000 X 1.20)
SALES
LESS: AR 12.31
COLLECTIONS FROM SALES
27 - D
CASH RECEIPTS:
OWNERS INVESTMENT
PROCEEDS FROM LOAN
COLLECTIONS FROM CUSTOMERS (SEE NO 26)
TOTAL
CASH DISBURSEMENTS:
PURCHASES (P250 - 15K)
STORE FIXTURES ( 50K-5K)
LOAN PAYMENT
EXPENSES PAID
CASH BALANCE PER BOOKS, 12.31

235,000.00
45,000.00
80,000.00
180,000.00

28 - C
UNADJUSTED BALANCE PER BANK, 12.31
OC , 12.31
UNDEPOSITED COLLECTIONS, 12.31
ADJUSTED BALANCE PER BANK, 12.31 (CASH ACCOUNTED)
CASH BAL. PER BOOKS, 12.31 (CASH ACCOUNTABILITY)
CASH - OVER (SHORT)
29 - D
30 - B
PROBLEM NO 7 - CEBU COMPANY
BALANCES PER BANK (A,G)
DIT (B)
NOV 30

11.30.11
14,010.00
2,740.00

RECEIPTS
281,070.00
(2,740.00)

DEC 31
OC
NOV 30
DEC 31(P3,870 - 700)
BANK COLLECTIONS NOT IN BOOKS (D)
NOV 30
DEC 31
BANK CHARGES NOT IN BOOKS (E)
NOV 30
DEC 31
DAIF CHECKS
RETURNED IN DEC (H)
RETURNED IN NOV (I)
RETURNED & RECORDED IN DEC (J)
BANK ERROR (K)
CASH RECEIPTS USED FOR PAYTS (L)
BOOK ERRORS (M,N)
CUSTOMERS CHECKS (465-165)
DISB. CHECKS (3,250-325)
BALANCES PER BOOKS

3,110.00
(4,260.00)

(1,200.00)

1,200.00
(1,600.00)

950.00

1,050.00

(1,050.00)
(900.00)
750.00
(300.00)

13,290.00
31 - A

279,540.00
32 - C

36 - B
37 - D
38 - D
39 -A
ROBINSON (70,000 - 30,000)
TRIPPER (RECEIVED PDC ON 11/1)
ADJUSTED NOTES RECEIVABLE - TRADE 12.31.11
40 - D
ROBINSON
JAN TO AUG - 70,000 X .06 X 8/12
SEPT TO DEC - 40,000 X .06 X 4/12
TRIPPER P8,000 X 0.06 X 12/12
PEPPER - P42,437 - P40,500
ANNA - 25,000 X .06 X 2/12
JULIA (NON INTEREST)
TOTAL INTEREST INCOME
41 - B

2,800.00
800.00

42 - C
PRINCIPAL
DIRECT ORGANIZATION COST
ORIGINATION FEE RECEIVED FROM BORROWER (10M X .05)
CARRYING AMOUNT, 01.01.11
43 - A
CA, 12.31.12
LESS PV OF EXPECTED CASH FLOWS:
12.31.14 - P4M X .8116
12.31.16 - P4M X .6587
LOAN IMPAIRMENT
44 - A
45 - B
46 - B
UNADJUSTED CASH BALANCE
CASH SALES
UNDELIVERED CHECKS
POST DATED CHECKS
COMPENSATING BALANCE - RESTRICTED
ADJUSTED CASH BALANCE
47 - C
UNADJUSTED BAL.
CLAIMS AGAINST SHIPPER
SP OF UNSOLD GOODS OUT ON CONSIGNMENT
SECURITY DEPOSIT ON LEASE WAREHOUSE
POST DATED CHECKS
UNRECORDED SALE - P46,000 X 1.3)
ADJUSTED AR
48 - A
AR, NET (SEE NO. 47)
CLAIMS AGAINTS SHIPPER
TRADE & OTHER RECEIVABLES, NET
49 - D
UNADJUSTED INVENTORY
GOODS SOLD FOB DESTINATION - IN TRANSIT
GOODS PURCHASED FOB SHIPPING POINT - IN TRANSIT
ADJUSTED INVENTORY

3,246,400.00
2,634,800.00

50 - B
CASH - SEE NO. 46
TRADE & OTHERS - SEE NO. 48
INVENTORY - SEE NO. 49
INVESTMENTS
PREPAID INSURANCE
CASH HELD AS COMPENSATING BALANCE
CURRENT ASSETS

WORKING CAP
OVER (UNDER)
(180,000.00)
(100,000.00)
0.00
200,000.00
250,000.00
(160,000.00)
10,000.00
4-B

6,000.00

3,750.00
2,250.00

24,000.00

82,500.00
(58,500.00)
COST
0.00
0.00
0.00
180,000.00
396,000.00
216,000.00
432,000.00
1,224,000.00
1,734,000.00

5-D

1,224,000.00
510,000.00

A/D
0.00
0.00
0.00
90,000.00
82,500.00
18,000.00
9,000.00
199,500.00
MACHINE B
38,000.00
60,000.00
20,000.00
40,000.00
(2,000.00)
P/ L

(2,000.00)
4,000.00
2,000.00

32,000.00

28,500.00
3,500.00

21,000.00
9,500.00
10,000.00
40,500.00
MACHINE C

CA
90,000.00
313,500.00
198,000.00
423,000.00
1,024,500.00

68,500.00
80,000.00
(10,000.00)
70,000.00
(1,500.00)
P/ L

50,000.00
5,000,000.00
750,000.00
5,800,000.00
600,000.00
5,200,000.00
4,000,000.00
1.30
6,500.00

5,200,000.00
6,500.00
5,193,500.00
275,000.00
5,468,500.00
6,995,000.00
0.78
780,000.00

1,500,000.00
250,000.00
1,250,000.00
1,550.00
1,248,450.00
225,000.00
1,473,450.00
6,995,000.00
0.21
210,000.00

5,468,500.00
780,000.00
4,688,500.00
1,100,000.00
5,788,500.00
5,995,000.00
0.97
2,425,000.00

525,000.00

3,375,000.00

2,380,000.00
995,000.00

315,000.00

760,500.00
1,075,500.00

7,200,000.00
1,800,000.00
5,400,000.00
1,800,000.00
3,600,000.00

3,375,000.00
315,000.00
3,690,000.00

18,800,000.00

(1,500,000.00)
1,760,000.00
19,060,000.00

250,000.00
30,000.00
220,000.00
264,000.00
484,000.00
70,000.00
414,000.00

150,000.00
98,000.00
414,000.00
662,000.00

540,000.00
122,000.00

91,500.00
(4,500.00)
5,000.00
92,000.00
122,000.00
(30,000.00)

DISBURSEMENTS
275,450.00

12.31.11
19,630.00

3,110.00
(4,260.00)
3,170.00

(3,170.00)

(1,600.00)
950.00
(640.00)

640.00

(800.00)

800.00

(900.00)
(2,010.00)
750.00

2,010.00

2,925.00
274,635.00
33 - D

40,000.00
8,000.00
48,000.00

3,600.00
480.00
1,937.00
250.00
0.00
6,267.00

(300.00)
(2,925.00)
18,195.00
34 - A

35 - B

10,000,000.00
130,900.00
(500,000.00)
9,630,900.00

9,756,232.00

5,881,200.00
3,875,032.00

1,056,000.00
(150,000.00)
93,000.00
(78,000.00)
(400,000.00)
521,000.00

1,220,000.00
(30,000.00)
(260,000.00)
(300,000.00)
78,000.00
59,800.00
767,800.00

767,800.00
30,000.00
797,800.00

441,000.00
38,000.00
51,000.00
530,000.00

521,000.00
797,800.00
530,000.00
200,000.00
50,000.00
400,000.00
2,498,800.00