ReSA

The Review School of Accountancy

8Tel. No. 735-9807 & 734-3989

AUDITING PROBLEMS IRENEO/ESPENILLA

QUIZZER 5 - CASH AND CASH EQUIVALENTS, RECEIVABLES AND INVENTORIES

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Presented below is a list of items that may or may not be reported as inventory in a company's
December 31, balance sheet:

Cost of goods out on consignment at another company's store P2,400,000

Goods sold on installment basis 300,000
Goods in transit purchased FOB shipping point 360,000
Goods in transit purchased FOB destination 600,000
Cost of goods sold to another company, for which the company has signed an
agreement to repurchase at a set price that covers all costs related to the
inventory 900,000
Cost of goods sold where large returns are predictable 840,000
Cost of goods in transit sold FOB shipping point 360,000
Freight charges on goods purchased 240,000
Factory labor costs incurred on goods stili unsold 150,000
Interest cost incurred for inventories that are routineiy manufactured 120,000
Costs incurred to advertise goods held for resale 60,000
Materials on hand not yet placed rnto productrcn 1 , O5C, OCC
Office supplies JL' L'I- -
Rarv materrais on whrch the company has sta!'ieC giocJc::on, D'Jt wllc.i ar€
not cornpletely processed s4c ,_ao3
Factory suppires 50. CCC
Cost of goods held on consrgnment from another compny 1,350, C,O0
Costs identified with units completed but not yet sold 780,000
Cost of goods in transit sold FOB destination 120,OO0
Temp. investment in stocks and bonds that witl be resold in the near future 1,5OO,OOO

L Hcrv rnuCh cf these items ,,vould tVpicalry tre r-eoorted aS !nve.,:3iv ,n lhe frna.r! Br S:a:?-.€.:S--
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PROALEU 2:
The following accounts were extracted from the unadjusted trial balance of Silang Corp. as of
December 31,2074:
Cash 963,200
Accounts receivables 2,254,00O
Merchandise inventory 6,o5o,0oo
Accounts payable 4,201,000
Accrued expenses 60,400

During your audit, you discovered that the client heid its cash records open even after year end.

Audit notes:
a. Collections forJanuary 2015 of P654,600 were recorded in the December 2014 cash records.
The receipts of P360,100 represents cash sales with the balance representing collections from
customers who paid'within the 5Yo cash discount period.

b. Accounts payable of P372,4O0 was paid in January 2O15. The payments on which a P12,400
cash discount has been taken were included in the December 31,2014 check register.

c. Merchandise inventory as stated in the triai balance represented the result of the count
conducted on December 30, 2Ot4 on inventories on hand. The following information were
found to be relevant in your audit of inventories:

Goods valued at P275,AAO are on consignment with a customer and were not included
in the physical count

Goods costing P217,500 were received from a vendor on January 4,2015. The related
invoice was receiVed and recorded on January 6, 2015. These goods were shipped by
the vendor on December 31, 2014 under an FOB shipping point terms.