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FINAL COMPREHENSIVE EXAM
Name: GUESSA FRANCESCA L. GELERA Section: BSA 3A Date: APRIL 6, 2022 G E N E R A L D I R E C T I O N S READ THIS PAGE BEFORE STARTING THE ASSESSMENT This is a 15-paged multiple-choice test and has a total score of sixty (60) points. You have eighty (80) Minutes to finish this examination. All things unnecessary for the test must be put in front of the testing area. Use BLACK or BLUE ink ballpen only. Write all your answers on the designated answer sheet. Further, erasures are strictly NOT allowed and will invalidate your answers. You may NOT use smart phones or reference materials during the testing session. Only the allowed calculators should be used. Try to answer all questions. In general, if you have some knowledge about a question, it is better to try to answer it. You will not be penalized for guessing. Be sure to allocate your time carefully so you can complete the entire test within the exam session. You may go back and review your answers at any time during the exam session. Those who are caught cheating or doing acts not allowed during the exam shall be instructed to surrender their test papers and shall leave the testing room immediately. Subsequently, their papers shall be rated as ZERO. This concludes the instruction page. You may now begin answering.
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LEARNING OBJECTIVE:
This assessment measures the competence of the student in terms of his/her application of knowledge and skills in Auditing and Assurance: Concepts and Applications 2 (ACC 141).
FINAL COMPREHENSIVE EXAM
Name: GUESSA FRANCESCA L. GELERA Section: BSA 3A Date: APRIL 6, 2022 1-5. Pirena Company completed the construction of a shopping mall at the end of 2018 for a total cost of P200 million. The mall has an estimated economic life of 25 years. The mall was constructed for the purpose of earning rentals by letting out space in the shopping mall to tenants. An independent valuation expert was used by the company to fair value the shopping mall on annual basis. According to the fair valuation expert, the fair values of the shopping mall at the end of 2019 and 2020 were P240 million and P230 million, respectively. Questions: Based on the above data, answer the following:
- If Pirena Company opted to use the cost model to measure the shopping mall, how much should be recognized in profit or loss in 2020 as a result of the fair value changes? a. P46,000,000 c. P30,000, b. P10,000,000 d. Nil
- If Pirena Company opted to use the cost model to measure the shopping mall, how much should be recognized in profit or loss in 2020 as depreciation expense? a. P9,600,000 c. P9,200, b. P8,000,000 d. Nil
- If Pirena Company opted to use the cost model to measure the shopping mall, how much is the carrying amount of the shopping mall to be reported in its statement of financial position as of December 31, 2020? a. P230,000,000 c. P200,000, b. P192,000,000 d. P184,000,
- If Pirena Company opted to use the fair value model to measure the shopping mall, how much should be recognized in profit or loss in 2020 as a result of the fair value changes? a. P46,000,000 c. P30,000, b. P10,000,000 d. Nil
- If Pirena Company opted to use the fair value model to measure the shopping mall, how much should be recognized in profit or loss in 2020 as depreciation expense? a. P9,600,000 c. P9,200, b. P8,000,000 d. Nil
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FINAL COMPREHENSIVE EXAM
Name: GUESSA FRANCESCA L. GELERA Section: BSA 3A Date: APRIL 6, 2022
- How much is the carrying amount of the shopping mail on December 31, 2010 if When I Look At You used the cost model? a. P100,000, b. P118,000, c. P96,600, d. P92,000, Mussels ni Karla Company accounted for noncurrent assets using the revaluation model. On October 1, 2018, the entity classified a land as held for sale. At that date, the carrying amount of the land was P5,000,000 and the balance in the revaluation surplus was P1,500,000. At the same date, the fair value of the land was estimated at P5,500,000 and the cost of disposal at P100,000. On December 31, 2018, the fair value less cost of disposal of the land did not change. The land was sold on January 31, 2019 for P6,000,000.
- What is the impairment loss in 2018? a. 100, b. 500, c. 400, d. 0
- What is the adjusted carrying amount of the land on December 31, 2018? a. 5,000, b. 5,500, c. 5,400, d. 3,500,
- What amount should be reported as gain on disposal of land in 2019? a. 1,000, b. 2,600, c. 500, d. 600,
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FINAL COMPREHENSIVE EXAM
Name: GUESSA FRANCESCA L. GELERA Section: BSA 3A Date: APRIL 6, 2022
- What amount of OCI is reclassified to retained earnings in 2019? a. 1,500, b. 2,000, c. 500, d. 0
- An auditor has set an audit objective of determining whether research and development projects were properly authorized. Which of the following audit techniques will best meet this objective? a. Inquiry b. Observation c. Analytical review d. Inspection of documents
- An entity developed a new secret formula which is of great value because it resulted in a virtual monopoly. The entity has capitalized all research and development costs associated with this formula. The CPA who is examining this account, will probably a. Confirm that the secret formula is registered and on file with the county clerk's office. b. Confer with management regarding a change in the title of the account to "goodwill." c. Confer with management regarding transfer of the amount from the statement of financial position to the income statement. d. Confer with management regarding ownership of the secret formula.
- The most effective means for the auditor to determine whether a recorded intangible asset possesses the characteristics of an asset is to a. Evaluate the future revenue-producing capacity of the intangible asset. b. Analyze research and development expenditures to determine that only those expenditures possessing future economic benefit have been capitalized. c. Vouch the purchase by reference to underlying documentation. d. Inquire as to the status of patent applications.
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FINAL COMPREHENSIVE EXAM
Name: GUESSA FRANCESCA L. GELERA Section: BSA 3A Date: APRIL 6, 2022 C. Evaluate the future revenue-producing capacity of the intangible asset. D. Analyze the research and development expenditures to determine that only those expenditures possessing future economic benefit have been capitalized.
- In auditing intangible assets, an auditor most likely would review or recompute amortization and determine whether the amortization period is reasonable in support of management's financial statement assertion of A. Valuation Allocation C. Completeness B. Existence D. Rights and obligations
- Assuming TLL has capitalized all research and development costs associated with patent. York, CPA, who is examining this account will probably A. Confer with management regarding transfer of the amount from the balance sheet to the income statement. B. Confirm that the patent is registered and on file with the intellectual property office. C. Confer with management regarding a change in the title of the account to "goodwill." D. Confer with management regarding ownership of the patent.
- Which of the following comparisons would be the most appropriate audit test for the amount of recorded goodwill? A. The purchase price and the book value of net tangible and identifiable assets purchased. B. The purchase price and the fair value of net tangible and identifiable assets purchased. C. The figure for goodwill specified in the contract of purchase. D. Earnings in excess of 5% of net assets for the past five years.
- A corporate balance sheet indicates that one of the corporate assets is a patent. An auditor will most likely obtain evidence regarding the continuing validity and existence of this patent by obtaining a written representation from A. A patent attorney. B. The SEC. C. The patent inventor. D. The patent owner.
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FINAL COMPREHENSIVE EXAM
Name: GUESSA FRANCESCA L. GELERA Section: BSA 3A Date: APRIL 6, 2022 On January 2, 2020, the Bohol, Inc. issued P2,000,000 of 8% convertible bonds at par. The bonds will mature on January 1, 2024 and interest is payable annually every January 1. The bond contract entitles the bondholders to receive 6 shares of P100 par value common stock in exchange for each P1, bond. On the date of issue, the prevailing market interest rate for similar debt without the conversion option is 10%. On December 31, 2021, the holders of the bonds with total face value of P1,000,000 exercised their conversion privilege. In addition, the company reacquired at 110, bonds with a face value of P500,000. The balances in the capital accounts as of December 31, 2020 were: Common stock, P100 par, authorized 50,000 shares, issued and outstanding, 30,000 shares P3,000, Premium on common stock 500, Market value of the common stock and bonds were as follows: Date Bonds Common stock December 31, 2004 118 40 December 31, 2005 110 42 Based on the above and the result of your audit, answer the following:
- How much of the proceeds from the issuance of convertible bonds should be allocated to equity? a. P634,000 b. P126,816 c. P221,664 d. P
- How much is the carrying value of the bonds payable as of December 31, 2020? a. P2,000,000 b. P1,389,400 c. P1,796,170 d. P1,900,
- How much is the interest expense for the year 2021? a. P160,000 b. P138,940 c. P179,617 d. P190,
- The entry to record the conversion on December 31, 2021 will include a credit to APIC of a. P365,276 b. P400,000 c. P307,893 d. P
- How much is the loss on bond reacquisition on December 31, 2021? a. P50,000 b. P96,053 c. P67,362 d. P
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FINAL COMPREHENSIVE EXAM
Name: GUESSA FRANCESCA L. GELERA Section: BSA 3A Date: APRIL 6, 2022 b. P1,250,000 d. P1,819, 35.The prepaid/accrued pension expense on December 31,2010 is a. P 0 c. P1,655, b. P3,143,302 d. P 721, The noncurrent liabilities of Pitogo Company at December 31, 2009 included the following: Note Payable, bank P3,600, Liability under finance lease 2,623, Note payable, supplier 1,500, Transactions during 2010 and other information relating to Pitogo’s liabilities were as follows: a) The note payable to the bank bears interest at 20% and is dated May 1,2009. The principal amount of P3,600,000 is payable in four equal annual installments of P900,000 beginning May 1, 2010. The first principal and interest payment was made on May 1, 2010. b) The finance lease is for a ten-year period. Equal annual payments of P750,000 are due on December 31, of each year. The interest rate implicit in the lease is 18%. The amount of P2,623,200 represents the present value of the six remaining lease payments (due December 31, 2010 through December 31, 2015) discounted at 18%. c) The note payable to supplier bears interest at 19% and matures on September 30, 2011. On February 25, 2011, after the end of the reporting period, but before the 2010 statements were authorized for issue, Pitogo Company consummated a noncancelable agreement with a lender to refinance the 19%. P1,500,000 on a long term basis, on readily determinable terms that have not yet been implemented. Both parties are financially capable of honoring the agreement, and there have been no violations of the agreement’s provisions. d) On April 1, 2010, Pitogo issued for P7,005,675, P6,000,000 face amount of its 20%, P100, bonds. The bonds were issued to yield 15%. The bonds are dated April 1, 2010 and mature on April 1, 2015. Interest is payable annually on April 1. QUESTIONS: Based on the above and the result of your audit, determine the following:
- Liability under finance lease as of December 31, 2010 a. P1,873,200 c. P2,017, b. P2,345,376 d. P1,123,
- Carrying amount of bonds payable as of December 31, 2010 a. P6,893,813 c. P6,856, b. P7,417,536 d. P7,117,
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FINAL COMPREHENSIVE EXAM
Name: GUESSA FRANCESCA L. GELERA Section: BSA 3A Date: APRIL 6, 2022
- Total noncurrent liabilities as of December 31, 2010 a. P12,211,357 c. P10,711, b. P10,154,190 d. P 9,817,
- Current portion of long-term liabilities as of December 31, 2010 a. P3,150,000 c. P2,727, b. P2,812,824 d. P2,169,
- Total interest expense for the year 2010 a. P2,145,314 c. P1,673, b. P2,408,028 d. P1,673, Butit Wholesale Foods, Inc., leases its single warehouse from Baboy Leasing Company. The terms of the lease provide for minimum lease payments of P150,000 per quarter, payable at the beginning of the quarter. The initial lease term runs for ten years with no renewal or purchase options. The warehouse was useful for an estimated life of fifteen years. The cost of the warehouse to Baboy was P3,000, and the market value at the date of the completion was approximately 24,200,000. The explicit interest rate stated in the lease agreement is 8%. The lease was signed and the warehouse was occupied on January 2, 2020. The company closes its books every December 31. You were assigned to audit the company's warehouse lease.
- The warehouse should be recorded in Roehl's books on January 2, 2020 at: a. 0 b. 4,103,322 c. 4,185,388 d. 4,200,
- What is the balance of the long-term lease liability, if there are any as of December 31, 2020? a. 0 b. 3,823,326 c. 3,895,418 d. 3,749,
- How much from the long-term lease ilability should be presented in the balance sheet as short- term? a. 0 b. 303,075 c. 309,137 d. 600, On January 1, 2020, Duron Corp. started leasing a building from Butiki Leasing Co. for a 10 year term. The lease agreement does not provide for provision for bargain purchase and that the asset shall be reverted back to Butiki after the lease term. The estimated useful life of the asset is 15 years and its prevailing fair value on the inception of the lease was at P6.6M.
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FINAL COMPREHENSIVE EXAM
Name: GUESSA FRANCESCA L. GELERA Section: BSA 3A Date: APRIL 6, 2022 information provided above, determine the adjusted balance of the following stockholders' equity accounts: A B C D
- Accumulated profits beginning (As restated) 6,620,000 6,800,000 6,580,000 6,680,
- Accumulated profits ending, Unappropriated 8,100,000 8,250,000 8,090,000 7,990,
- Total contributed capital 41,450,000 41,610,000 41,400,000 41,000,
- Treasury stocks 320,000 160,000 210,000 110,
- Total stockholders' equity 49,700,000 49,650,000 49,540,000 49,380,
- Under which of the following circumstances would the use of the blank from of confirmations of accounts receivable most likely be preferable to positive confirmation? a. Subsequent cash receipts are unusually difficult to verify. b. The recipients are likely to sign the confirmations without devoting proper attention to them. c. Analytical procedures indicate that few exceptions are expected. d. The combined assessed level of inherent risk and control risk is low.
- Which of the following populations should the auditor start form when testing for the completeness of reported sales of a manufacturing company and to ascertain that all valid sales are appropriately billed to customers and are ultimately recorded as sales? a. Sales receipts b. Sales invoices c. Sales orders d. Goods dispatch notes
- Sales records or invoices should be traced back to and compared with shipping documents to: a. Ascertain that all recorded sales pertain to goods that are actually delivered to customers. b. Esture that shipments to customers are billed. c. Determine whether payments are properly applied to customer accounts. d. Determine whether unit prices billed are in accordance with sales contracts.
- The auditor wants to obtain evidence in support to the financial statement assertion of occurrence of sales transactions and the corresponding existence of the related receivable balance. The auditor would most likely do which of the following substantive test procedure? a. Trace the shipping documents and sales invoices to the entry in the sales journal. b. Trace the approved customer orders to the shipping documents and the sales invoices.
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FINAL COMPREHENSIVE EXAM
Name: GUESSA FRANCESCA L. GELERA Section: BSA 3A Date: APRIL 6, 2022 c. Trace the sales invoice to the daily sales summary. d. Trace back journal entries to the sales journal to the sales invoice and shipping documents.
- As part of auditing the company's revenue/receipt cycle, the auditor decided to render a sales cut- off by tracing entries several days before and after the balance sheet date from the company's sales journal to the source documents which include the sales order, the sales invoice and the delivery receipt. Which of the following is correct regarding the sales cut-off procedures? a. Vouching entries several days before the balance sheet date to the source documents is necessary to gather evidence regarding completeness assertion of receivables while vouching entries several days after the balance sheet date to the source documents is necessary to gather evidence regarding the existence assertion of receivables. b. Vouching entries several days before and after balance sheet date to the source documents is necessary to gather evidence regarding valuation assertion of receivables. c. Vouching entries several days before the balance sheet date to the source documents is necessary to gather evidence regarding existence assertion of receivables while vouching entries several days after the balance sheet date to the source documents is necessary to gather evidence regarding rights assertion of receivables. d. Vouching entries several days before the balance sheet date to the source documents is necessary to gather evidence regarding rights assertion of receivables while vouching entries several days after the balance sheet date to the source documents is necessary to gather evidence regarding valuation assertion of receivables.
- Your audit of the accounts receivable through analytical procedures revealed that the accounts receivable turnover ratio had fallen from 7.5 times to 4.4 times from the previous year. Which of the following is a valid audit insight from the said information? a. There might have been a more liberal credit policy thus the auditor should increase sample size on accounts receivable confirmation to gather further audit evidence on accounts receivable existence and rights assertion. b. There might have been a more stringent credit policy thus the auditor should gather further audit evidence in support of the valuation assertion on accounts receivable. c. There might have been a more stringent credit policy thus the auditor should increase sample size on accounts receivable confirmation to gather further audit evidence in support of the valuation assertion on accounts receivable.
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FINAL COMPREHENSIVE EXAM
Name: GUESSA FRANCESCA L. GELERA Section: BSA 3A Date: APRIL 6, 2022 d. Test whether the recorded purchases are for goods actually received and ordered which is consistent with gathering evidence in support of the completeness assertion over purchases and accounts payable.
- As part of auditing the company's purchasing/disbursement cycle, the auditor decided to render a purchases cut-off by tracing entries several days before and after the balance sheet date, December 31, from the company's purchases journal to the source documents, which include the purchase order, the sales invoice of the supplier and the receiving report, Which of the following is correct regarding the purchases cut-off procedures? a. December entries are traced back to the source documents to gather evidence regarding the existence assertion over payables; January entries are traced back to the source documents to gather evidence regarding the completeness assertion over payables. b. December entries are traced back to the source documents to gather evidence regarding the completeness assertion over payables, January entries are traced back to the source documents to gather evidence regarding the existence assertion over payables. c. December entries are traced back to the source documents to gather evidence regarding the valuation abortion over payable, January entries are traced back to the source documents to gather evidence regarding the existence assertion over payables.
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