AUDITING PROBLEMS PROBLEM 1 NDU Corporation has 32,000 shares of P2 par common stock authorized. Only !

" of these shares ha#e $een issued, and of the shares issued, only 22,000 are outstandin%. On Decem$er 3&, 200', the stockholders( e)uity section re#ealed that the $alance in Paid*in Capital in +,cess of Par -alue . Common /as P032,000, and the 1etained +arnin%s /as P&20,000. 2reasury stock /as purchased at an a#era%e cost of P30 per share. Durin% 200 NDU Corporation had the follo/in% transactions4 5an &! 7e$ & 8ar &! 9pr &! 30 NDU issued, at P!2.!0 per share, &,'00 shares of P!0 par, 3" cumulati#e preferred stock6 3,000 share are authorized. NDU sold 3,000 share of ne/ly issued P2 par common stock at P3! per share. NDU declared a cash di#idend on common stock of P0.20 per share, paya$le on 9pril 30 to all stockholders of record on 9pril &. NDU reac)uired 300 shares of its common stock for P30 per share. +mployees e,ercised 2,000 stock options %ranted in &:::. ;hen the option /ere %ranted, each option entitled the employees to purchase & share of common stock for P!0 per share. 2he share price on the %rant date /as P'0 per share. On 9pril 30, /hen the market price /as P!! per share, NDU issued ne/ shares to the employees. NDU declared a 2!" stock di#idend to common stockholders to $e distri$uted on 5une & to stockholders of record 8ay . 2he market price of the common stock /as P!0 per share on 8ay &. NDU sold 300 treasury shares reac)uired on 9pril &! and an additional 300 shares costin% P&',000 that had $een on hand since the $e%innin% of the year. 2he sellin% price /as P'0 per share. 2he semiannual cash di#idend on common stock /as declared, amountin% to P0.20 per share. NDU also declared the yearly di#idend on preferred stock. =oth are paya$le on Octo$er &! of record on Octo$er &.

8ay &

3&

<ept &!

Net income for 200 /as P&!0,000. Questions: &. 2. 3. 2he preferred stock $alance on Decem$er 3&, 200 should $e a. P 00,000 $. P 03,000 c. P 0',000 2he common stock $alance on Decem$er 3&, 200 should $e a. P !',000 $. P '&,300 c. P &,300 d. P :0,000 d. P !,300

2he paid*in capital in e,cess of par . common $alance at Decem$er 3&, 200 should $e a. P 23!,000 $. P :'&,000 c. P &,0 ,000 d. P &,3:',200 2he paid*in capital in e,cess of par . preferred $alance at Decem$er 3&, 200 should $e a. P 3,000 $. P 20,000 c. P 00,000 d. P :3,'00 2he di#idends paya$le . common $alance at Decem$er 3&, 200 should $e a. P 0,3:3 $. P 0,233 c. P 3, !0 d. P 0

3.

!.

PROBLEM 2 ND8C Corporation has $een in its plant facility for &0 years. 9lthou%h the plant is )uite functional, numerous repair costs are incurred to maintain it in sound /orkin% order. 2he company(s plant asset $ook #alue is currently P3,000,000 as indicated $elo/4 Ori%inal cost 9ccumulated depreciation Net carryin% #alue ',000,000 3,000,000 3,000,000

Durin% the current year, the follo/in% e,penditures /ere made to the plant facility4

&. =ecause of increased demand for its product, the company increased its plant capacity $y $uildin% a ne/ addition at a cost of P&,''0,000. 2. 2he entire plant /as repainted at a cost of P233,000. 3. 2he roof /as an as$estos cement slate6 for safety purposes it /as remo#ed and replaced /ith a /ood shin%le roof at a cost of P 00,000. =ook #alue of the old roof /as P&30,000. 2he ori%inal cost /as P3&0,000. 3. 2he electrical system /as completely updated at a cost of P300,000. 2he cost of the old electrical system /as not kno/n. >t is estimated that the useful life of the $uildin% /ill not chan%e as a result of this updatin%. !. 9 series of ma?or repairs /ere made at a cost of P'30,000 $ecause parts of the /ood structure /ere rottin%. 2he cost of the old /ood structure /as not kno/n. 2hese e,tensi#e repairs are estimated to increase the useful life of the $uildin%. Questions: '. 9fter considerin% the transactions a$o#e, the $alance of the =uildin%s account should $e a. P 0, 30,000 $. P 0,' 2,000 c. P 0,'&0,000 d. P 0,330,000 9fter considerin% the transactions Depreciation account should $e a. P 3,000,000 $. P 2,020,000 2he loss from replacement of roof is a. P 0 $. P &30,000 a$o#e, the $alance of the 9ccumulated

c. P 2,230,000 c. P &00,000

d. P 2,&00,000 d. P 3&0,000

0.

Problem 2he follo/in% entries /ere made $y the accountant of ND8U CO8P9N@4 200 5an 2 >n#estment in $onds &&,&20,000 Cash &&,&20,000 Purchase of P10,000,000, 18% bonds at 102plus accrued interest and brokers fee. Bonds mature January 1, 2010. 5an 3 Cash :00,000 >nterest income :00,000 nterest recei!ed on 18% in!estment in bonds. "#his same entry $as made $hen interest $as recei!ed on July 1, 200%&.

5uly & >n#estment in preferred stock &0,020,000 Premium paid on preferred stock 200,000 Cash &0,220,000 Purchase of 100,000 shares of 8% P100 preferred stock of 'l (orp. at 102) brokers fee, P20,000 Dec & >n#estment in common stock !,000,000 Cash !,000,000 Purchase of *0,000 shares P100 par common stock of +andy (o. at P100 per share after a P1 per share di!idend had been declared by +andy (o. ,o brokers fee. Dec 3&Cash 000,000 Premium paid on preferred stock Di#idend income -i!idend recei!ed on preferred stock in!estment !0,000 >n#estment in common stock P1 per share on in!estment in common stock 200,000 '00,000

Dec 3&Cash

!0,000

Auestion4 :. ;hat is the total interest income on in#estment in $onds for a. P &,02 ,!00 $. P &,000,000 c. P &, 2,!00

200 B
d. P :2 ,!00

&0. &&.

;hat is the carryin% #alue of the in#estment in $onds at Decem$er 3&, 200 B a. P &&,0:2,!00 $. P &0,23 ,!00 c. P &0,200,000 d. P &0,&:2,!00 ;hat is the di#idend income on preferred stock in#estment for

200 B

a. P 0

$. P 200,000

c. P '00,000

d. P 000,000

&2.

;hat ad?ustin% entry should $e made at Decem$er 3&, 200 , to correct the in#estment in common stock accountB a. Di#idend income !0,000 c. 1etained earnin%s !0,000 >n#est. >n C< !0,000 >n#est. in C< !0,000 $. 1etained earnin%s !0,000 d. No ad?ustin% entry Di#idend income !0,000

Problem ! On 5anuary &0, 200 , you started the audit of the financial records of NDDU Corporation for the year ended Decem$er 3&, 200'. 7rom your in#esti%ation, you disco#ered the follo/in%4 &. 2he $ookkeeper acts also as the cashier. reconciliation contained the follo/in%4 Cer Decem$er 3&, 200' year*end cash &'&,300 &'3,0!0 &!,0!0 !0 ,200

Cash per led%er, &2D3&D03 Cash per $ank, &2D3&D03 Checks outstandin% =in% Corporation check char%ed $y $ank in error &3D30D03, corrected $y $ank on &D03D0! Deposit in transit, credit $y $ank on &D3D0! 2. 2he cash account $alance per led%er as of &2D3&D03 /ere4 Cash Petty Cash

&'&,300 &,!00

3. 2he cost of the cash on hand at the close of $usiness on 5anuary &0, 200 , includin% the petty cash /as as follo/s4 Currencies and coins +,pense #ouchers +mployees( >OU dated &D!D0! Customers( checks in payment of account :,0!0 E 000F E 300F :00 &&,0!0

3. 7rom 5anuary 2, 200 to 5anuary &0, 200 , the date of your cash count, total cash receipts appearin% in the cash record /ere P30,'00. 9ccordin% to the $ank statement for the period from 5anuary 2, 200 to 5anuary &0, 200 , total deposits /ere P32,300. !. On 5uly !, 200', cash of P&,'00 /as recei#ed from a customer in settlement of his account. 2his /as $ooked $y a de$it to 9llo/ance for Dou$tful 9ccounts and a credit to 9ccounts 1ecei#a$le. '. On Decem$er !, 200', cash of P2,:00 /as recei#ed from a customer in settlement of his account. NDDU Corporation de$ited >n#entory and credited 9ccounts 1ecei#a$le. . Cash of P&,000 recei#ed from customer durin% 200' /as not recorded. 0. Checks recei#ed from customers from 5anuary 2, 200 to 5anuary &0, 200 , totalin% P3,200 /ere not recorded $ut /ere deposited in the $ank. :. On 5uly &, 200', the $ank refunded interest of P200 $ecause a note of NDDU Corporation /as paid $efore maturity. No entry had $een made for the refund. &0. >n the cashiers petty cash, there /ere receipts for collection from customer on 5anuary :, 200 totalin% P&,2!06 these /ere unrecorded and undeposited. &&. >n the outstandin% checks, there is one for P !0 made paya$le to a trade creditor. >n#esti%ation sho/s that this check had $een returned $y the creditor on 5une &3, 200' and a ne/ check for P&,2!0 /as issued in its place6 the ori%inal check for P !0 /as made in error as to amount.

Auestions4 &3. &3. 2he ad?usted $ank $alance as of Decem$er 3&, 200' is4 a. P &!0,3!0 $. P &! , 00 c. P &!',:!0 d. P &!0, 00

2he correct cash $alance, per led%er as of Decem$er 3&, 200' is4 a. P &':, 00 $. P &'0,'!0 c. P &' ,:00 d. P &' , 00

&!. &'.

2he amount of cash shorta%e as of Decem$er 3&, 200' is4 a. P &',!00 $. P &&,2!0 c. P &0,:!0

d. P &0,200

2he amount of cash shorta%e for the period from 5anuary &, 200 to 5anuary &0, 200 is4 a. P 3,300 $. P ,000 c. P 0,!00 d. P &!, 00

Problem " 9$am Corporation is sellin% audio and #ideo appliances. 2he company(s fiscal year ends on 8arch 3&. 2he follo/in% information relates the o$li%ations of the company as of 8arch 3&, 2003. Notes paya$le 9$am has si%ned se#eral lon%* term notes /ith financial institutions. 2he maturities of these notes are %i#en $elo/. 2he total unpaid interest for all of these notes amount to P330,000 on 8arch 3&, 2003. Due date 9pril 3&, 2003 5uly 3&, 2003 <eptem$er &, 2003 7e$ruary &, 200! 9pril &, 200!* 8arch 3&, 2000 9mount P '00,000 :00,000 3!0,000 3!0,000 2, 00,000 P!,&00,000

+stimated /arranties4 9$am has one year product /arranty on some selected items. 2he estimated /arranty lia$ility on sales made durin% the 2002* 2003 fiscal year and still outstandin% as of 8arch 3&, 2003, amounted to P2!2,000. 2he /arranty costs on sales made from 9pril &, 2003 to 8arch 3&, 2003 are estimated at P'30,000. 2he actual /arranty costs incurred durin% 2003* 2003 fiscal year as follo/s4 ;arranty claims honored on 2002* 2003 ;arranty claims honored on 2003* 2003 sales 2otal P2!2,000 20!,000 P!3 ,000

2rade paya$les 9ccounts paya$le for supplies, %oods and ser#ices purchases on open account amount to P!'0,000 as of 8arch 3&, 2003. Di#idends On march &0, 2003, 9$am(s $oard of directors declared a cash di#idend of P0.30 per common share and a &0" common stock di#idend. =oth di#idends /ere to $e distri$uted on 9ptil !, 2003 to common stockholders on record at the close of $usiness on 8arch 3&, 2003. 9s of 8arch 3&, 2003, NDGC has ! million, P2 par #alue common stock shares issued and outstandin%. =onds paya$le NDGC issued P!,000,000, &2" $onds, on Octo$er &, &::0 at :'. 2he $onds /ill mature on Octo$er &, 2000. >nterest is paid semi* annually on Octo$er & and 9pril &. NDGC uses strai%ht line method to amortize $ond discount. =ased on the for%oin% information, determine the ad?usted $alances of the follo/in% as of 8arch 3&, 20034 & . &0. &:. 20. 2&. a. +stimated /arranty paya$le P2!2,000 $. P33!,000 c. P'30,000 c. P&00,000 c. P&!0,000 c. P!,33!,000 c. P ,!00,000 d. P002,000 d. P:0,000 d. P2!0,000 d. P3,:3!,000 d. P ,'&0,000

Unamortized $ond discount a. P&&0,000 $. P200,000 =ond interest paya$le a. P0 $. P300,000 2otal current lia$ilities a. P',33!,000 $. P!,&0!,000 2otal noncurrent lia$ilities a. P , 00,000 $. P ,!:0,000

PROBLEM # ND+9 Company purchased 2!0,000 shares of <imultaneous Corp. common stock on 5uly &, 200', at P&'.!0 per share, /hich reflected $ook #alue as of that date. 9t the time of the purchase, <imultaneous had &,000,000 common shares outstandin%. ND+9 had no o/nership interest in <imultaneous prior to this purchase. <imultaneous reported net

income of P030,000 for the si, months ended 5une 30, 200'. ND+9 recei#ed a di#idend of P&0!,000 from <imultaneous on 9u%ust &, 200', <imultaneous reported net income of P&,000,000 for the year ended Decem$er 3&, 200', and a%ain paid ND+9 Company di#idends of P&0!,000. On 5anuary &, 200 , ND+9 sold &00,000 shares of <imultaneous Corp. common stock for P& per share and reclassified the remainin% stock as noncurrent. <imultaneous reported net income of P&,0'0,000 for the year ended Decem$er 3&, 200 , paid ND+9 Company di#idends of P'0,000. Auestions4 22. 23. ;hat is the in#estment $alance on Decem$er 3&, 200'B a. P3,&2!,000 $. P3,&30,000 c. P3,&!!,000 d. P3,2'0,000

;hat is the %ain on sale of &00,000 shares on 5anuary &, 200 B a. P!0,000 $. P33,000 c. P30,000 d. P0.

23. 2he cumulati#e effect of the chan%e from e)uity to cost method of accountin% for the in#estment in common stock to $e reported in the statement of chan%es in e)uity should $e a. P30,000 credit $. P230,000 de$it c. P30,000 de$it d. P0 2!. 2he share in net income of <imultaneous to $e reco%nized $y ND+9 in its income statement for 200 should $e a. P2&:,000 $. P'0,000 c. P2 :,000 d. P0 2'. ;hat is the in#estment $alance on Decem$er 3&, 200 B a. P2,3:3,000 $. P2, '3,000 c. P3,&2!,000 d. P3,&!!,000

PROBLEM $ @ou are en%a%ed in the re%ular annual e,amination of the accounts and records of =uddy 8anufacturin% Company for the year ended Decem$er 3&, 2003. 2o reduce the /ork load at year*end, the company, upon your recommendation, took its annual physical in#entory on No#em$er 30, 2003. @ou o$ser#ed the takin% of the in#entory and made tests of the in#entory count and the in#entory records. 2he company(s in#entory account, /hich includes ra/ materials and /ork*in*process is on a perpetual $asis. >n#entories are #alued at cost, first*in, first*out method. 2here is no finished %oods in#entory. 2he company(s physical in#entory re#ealed that the $ook in#entory of P3,23:,:00 /as understated $y P2&0,000. 2o a#oid delay in completin% its monthly financial statements, the company decided not to ad?ust the $ook in#entory until year end e,cept for o$solete in#entory. @ou e,amination disclosed the follo/in% information re%ardin% the No#em$er 30 in#entory4 &. Pricin% tests sho/ed that physical in#entory /as o#erstated $y P&!3,000. 2. 9n understatement of the physical in#entory $y P&0,!00 due to errors in footin%s and e,tensions. 3. Direct la$or included in the in#entory amounted to P 00,000. O#erhead /as included at the rate of 200" of direct la$or. @ou ha#e ascertained that the amount of direct la$or /as correct and that the o#erhead rate /as proper. 3. 2he physical in#entory included o$solete materials /ith a total cost of P& ,!00. Durin% Decem$er, the o$solete materials /ere /ritten off $y a chan%e to cost of sales. @our audit also disclosed the follo/in% information a$out the Decem$er 3& in#entory4 &. 2otal de$its to the follo/in% accounts durin% Decem$er /ere4 Cost of sales Direct la$or 8anufacturin% e,pense Purchases 3,002,000 H 03 ,000 &, '3,000 &, 2:,000

H >ncludes direct la$or of P:'',000 and manufacturin% o#erhead of P&,:32,000. 2. <crap loss on esta$lished product lines is normally insi%nificant. Co/e#er, a special order started and completed durin% Decem$er had a scrap loss of P!',000. 2his amount /as char%ed to manufacturin% e,pense. Auestions4

2 . 2he ad?usted amount of physical in#entory at No#em$er 30, 2003 is4 a. P 3,0 0,:00 $. P 3,200,:00 c. P 3,3:0,:00 d. P 3,!:',:00 20. 2he ad?usted amount of in#entory at Decem$er 3&, 2003 is4 a. P 3,033,300 $. P 3,02',:00 c. P 3, 3,300 d. P 3, !',:00

2:. 2he ra/ materials included in the endin% in#entory at Decem$er 3&, 2003 is4 a. P &,:'&,300 $. P 2,0&3,:00 c. P 2,03&,300 d. P 2,&00.:00 30. 2he direct la$or included in the endin% in#entory at Decem$er 3&, 2003 is4 a. P !0&,000 $. P 03 ,000 c. P 00,000 d. P :'',000 3&. 2he total cost of sales for Decem$er 3&, 2003 is4 a. P 3,0!3,!00 $. P 3,002,000 c. P 3, 03,!00 d. P 3, &3,!00

Problem % @ou re)uested a depreciation schedule for <emitrucks of Iam$an 8anufacturin% Company sho/in% the additions, retirements, depreciation and other data affectin% the income of the Company in the 3*year period 2003 to 200', inclusi#e. 2he <emitrucks account consists of the follo/in% as of 5anuary &, 20034 2ruck 2ruck 2ruck 2ruck No.& No.2 No.3 No.3 purchased purchased purchased purchased 5an.&, 2000, cost 5uly.&, 2000, cost 5an.&, 2002, cost 5uly.&, 2002, cost P&00,000 220,000 300,000 230,000 P :30,000

The Semitrucks Accumulated Depreciation account previously adjusted to January 1, 2003, and duly entered to the led er, had a !alance on that date o" #302,000 $depreciation on the % trucks "rom respective date o" purchase, !ased on "ive&year li"e, no salva e value'( )o char es have !een made a ainst the account !e"ore January 1, 2003(
2ransactions $et/een 5anuary &, 2003 and Decem$er 3&, 200', and their record in the led%er /ere as follo/s4 5uly &, 2003 2ruck No. 3 /as traded for lar%er one ENo.!F, the a%reed purchase price of /hich /as P330,000. Iam$an 8f%. Co. paid the automo$ile dealer P&!0,000 cash on the transaction. 2he entry /as de$it to <emitrucks and a credit to cash, P&!0,000. 2ruck No. & /as sold for P3!,000 cash6 entry de$ited Cash and credited <emitrucks, P3!,000. 9 ne/ truck ENo. 'F /as ac)uired for P3'0,000 cash and /as char%ed at that amount to <emitrucks account. E9ssume truck No. 2 /as not retired.F 2ruck No.3 /as dama%ed in a /reck to such an e,tent that it /as sold as ?unk for P ,000 cash. Iam$an 8f%. Co. recei#ed P2!,000 from the insurance company. 2he entry made $y the $ookkeeper /as a de$it to cash, P32,000, and credits to 8iscellaneous >ncome, P ,000 and <emitrucks P2!,000.

5an. &, 2003 5uly &, 200!

5uly &, 200!

+ntries for depreciation had $een made for the close of each year as follo/s4 2003, P203,0006 2003, P2&&,0006 200!, P233,!006 200', P2 0,000. Auestions4 =ased on the a$o#e and the result of your audit, determine the follo/in%4 EDisre%ard ta, implicationsF 32. 2he 200' depreciation e,pense is a. P&30,000 $. P&03,000 c. P&03,000 d. P&30,000 d. P3!3,000 d. P0 d. P0

33. 2he carryin% amount of <emitrucks as of Decem$er 3&, 200' is a. P00!,300 $. P203,000 c. P!03,000 33. 2he 2003 net income is o#erstated $y a. P:,000 $. P20,000 3!. 2he 2003 net income is understated $y a. P&',000 $. P!0,000 c. P3&,000 c. P!&,000

3'. 2he 200! net income is understated $y a. P23,!00 $. P:3,!00

c. P'3,!00

d. P0

Problem & @ou are e,aminin% the financial statements of Oli#er Company for the year ended Decem$er 3&, 200!. @ou analysis of the 200! Notes 1ecei#a$le account follo/s4 &. 9s of 5anuary &, 200!, the $alances of the follo/in% three notes /ere4 a. 8acasarte note is P 0,000, /hich has $een recei#ed on 9u%ust 3&, 2003, and paya$le in annual installments of P&0,000 principal plus accrued interest at '" each 9u%ust 3&. $. 5eanina note is P0,000, /hich has $een discounted $y a $ank to Oli#er Company at '" on No#em$er &, 2003 and /ill due on No#em$er &, 200!. c. Noynay note is P30,000 at '" interest dated Decem$er 3&, 2003, and due on <eptem$er &, 200!. 2. Other $alances as of 5anuary &, 200! /ere confirmed4 a. De$it of P&,300 in the >nterest 1ecei#a$le account. $. Credit of P300 in the Prepaid >nterest +,pense account. 3. 9nalysis of the transactions for the year discloses the follo/in%4 a. On 7e$ruary 2:, recei#ed P2!,000 '" note due Octo$er 2:, 200! from 5efferson /hose trade account /as past due. On the same date the said note has $een discounted $y a $ank at '". 2he cash proceeds amountin% to P23,:'0 /as $een credited to the Notes 1ecei#a$le account. $. On 9u%ust 30, P33,200 has $een credited to the Notes 1ecei#a$le account representin% the receipt of the principal and interest due from 8acasarte /hich is in accordance /ith a%reement includin% the t/o*year principal payments in ad#ance. c. On <eptem$er 3, Oli#er paid protest fee on note dishonored $y Noynay. 2he P! payment has $een de$ited to the Note 1ecei#a$le account. d. On No#em$er &, Oli#er recei#ed a check dated 7e$ruary &, 200', in settlement of 5eanina note. 2he check amountin% to P0,&20 /as included in cash on hand on Decem$er 3&, 200!, and credited to the Note 1ecei#a$le account. e. On No#em$er 3, the company paid protest fee and maturity #alue of 5efferson note to the $ank, $ecause the note discounted on 7e$ruary 2:, 200! /as dishonored. 2he total cash paid $y the company is P2',03& and /as de$ited to the Note 1ecei#a$le account. f. On Decem$er 2 , the company accepted furniture and fi,tures /ith a fair market #alue of P23,000 in full settlement from 5efferson. 2he amount has $een credited to the Note 1ecei#a$le account. %. On Decem$er 3&, recei#ed principal and interest on Noynay note amountin% to P32,33 . 2he said amount has $een credited to the Note 1ecei#a$le account. h. On Decem$er 3&, an accrued interest on 8acasarte note of P&,200 has $een de$ited to the Note 1ecei#a$le account. Auestions4 3 . 2he effect on the Note 1ecei#a$le account for the discountin% of 5efferson note on 7e$ruary 2: a. Under $y P23,:'0 c. Under $y P2!,000 $. O#er $y P2!,000 d. O#er $y P23,:'0 30. 2he entry on the receipt of principal and interest due from 8acasarte note has a a. De$it to interest recei#a$le at P2,000. $. Credit to interest income at P&,300. c. Credit to notes recei#a$le at P33,200. d. De$it to notes recei#a$le at P3,200. 3:. 2he account recei#a$le to $e reco%nized from Noynay note /hich has $een dishonored on <eptem$er 3 a. P 30,000 $. P 30,00! c. P 3&,'00 d. P 3&,'0! 30. 2he account recei#a$le to $e reco%nized from 5eanina note from the receipt of a check dated 7e$ruary &, 200' and /hich has $een recorded as cash on hand on Decem$er 3&, 200!. a. P 0,'00 $. P 0,300 c. P 0,000 d. P 0,000 3&. 2he ad?ustin% entry on the receipt of a post*dated check from 5eanina note a. De$it to accounts recei#a$le for P0,000.

$. Credit to unearned interest income for P300. c. Credit to notes recei#a$le for P&20. d. De$it to notes recei#a$le for P0,300. 32. 2he effect on the note recei#a$le account after 5efferson note that has $een dishonored on 7e$ruary 2: /as dishonored a. O#er $y P2',03& c. Under $y P2!,000 $. Under $y P!&,03& d. O#er $y P!&,03& 33. 9d?ustin% entry for the full settlement of 5efferson note throu%h furniture and fi,tures /ith a fair #alue of P23,000 a. Credit to notes recei#a$le at P23,000. $. De$it to allo/ance for dou$tful accounts at P2,03&. c. Credit to notes recei#a$le at P2',03&. d. De$it to accounts recei#a$le at P2',03&. 33. 9d?ustin% entry on the full settlement of Noynay note a. De$it to notes recei#a$le at P32,33 . $. Credit to notes recei#a$le at P32,33 . c. De$it to accounts recei#a$le at P3&,'0!. d. Credit to accounts recei#a$le at P32,33 . 3!. 9d?usted $alance of Notes 1ecei#a$le on Decem$er 3&, 200! a. P !!,00! $. P !&,00! c. P 30,000 d. P &0,000

3'. ;hich of the follo/in% strate%ies most likely could impro#e the response rate of the confirmation of accounts recei#a$leB a. >ncludin% a list of items or in#oices that constitute the account $alance. $. 1estrictin% the selection of accounts to $e confirmed to those customers /ith relati#ely lar%e $alances. c. 1e)uestin% customers to respond to the confirmation re)uests directly to the auditor $y fa, or e*mail. d. Notifyin% the recipient that second re)uests /ill $e mailed if they fail to respond in a timely manner. 3 . >n confirmin% /ith an outside a%ent, such as a financial institution, that the a%ent is holdin% in#estment securities in the client(s name, an auditor most likely %athers e#idence in support of mana%ement(s financial statement assertions of e,istence or occurrence and a. -aluation or allocation c. Completeness $. 1i%hts and o$li%ations d. Presentation and disclosure 30. 9n auditor most likely /ould re#ie/ an entity(s periodic accountin% for the numerical se)uence of shippin% documents and in#oices to support mana%ement(s financial statement assertion of a. +,istence c. -aluation or allocation $. 1i%hts and o$li%ations d. Completeness 3:. ;hen usin% confirmation to pro#ide e#idence a$out the completeness assertion for accounts paya$le, the appropriate population most likely /ould $e a. -endors /ith /hom the entity has pre#iously done $usiness. $. 9mounts recorded in the accounts paya$le su$sidiary led%er. c. Payees of checks dra/n in the mont h after the year end. d. >n#oices filed in the entity(s open in#oice file. !0. 9n auditor(s pro%ram to e,amine lon%*term de$t most likely /ould include steps that re)uire a. Comparin% the carryin% amount of the de$t to its year*end market #alue. $. Correlatin% interest e,penses recorded for the period /ith outstandin% de$t. c. -erifyin% the e,istence of the holders of the de$t $y direct confirmation. d. >nspectin% the accounts paya$le su$sidiary led%er for unrecorded lon%*term de$t. ***+nd Of +,amination***