Problem 1

AUDIT WORKING PAPER

Accounts Receivable on December 31
Add - Write-offs
Collections
No. 1
Total
Less - Accounts Receivable on January
Sales

37,500.000
1,000.000
208,333.333
246,833.333
13,500.000
233,333.333

Accounts Payable on December 31

Add - Payments for merchandise
No. 2Total
Less - Accounts Payable on January 1
Purchases

50,000.000
77,500.000
127,500.000
127,500.000

Inventory, January 1, at cost

Add - Purchases
Cost of goods available for sale
No. 3Less - Cost of sales (40% GP on Sales)
Computed Inventory at cost
Less - December 31 inventory at cost
Inventory shortage

39,000.000
127,500.000
166,500.000
140,000.000
26,500.000
26,500.000
-

Propose adjusting entries

Account
Cost of Sales
Other Expenses
Inventory
Allowance to reduce inventory to NRV
26500-28000=1500

Dr.

Cr.
1,500.000
1,500.000

Accounts Receivable
Write-off of Accounts Receivable
Sales

232,333.333
1,000.000

Inventory
Accounts Payable
Cash

127,500.000

233,333.333

50,000.000
77,500.000

Evaluation
Audit Working Paper
Accounts
Sales
Accounts Receivable, beg
Write-off
Collections
Accounts Receivable, end
Sales
Purchases
Accounts Payable on January 1
Payment for Merchandise
Accounts Payable on December 31
Purchases
Shortage(overage)
Inventory, January 1, at cost
Purchases
Cost of Sales (40% GP on Sales)
Inventory, December 31, at cost
Inventory shortage

Dr

Cr

13,500.000
1,000.000
0.000
37,500.000
25,000.000
0.000
77,500.000
50,000.000
127,500.000
39,000.000
127,500.000
15,000.000
26,500.000
125,000.000

Sales
Inventory, beg
Purchases
Inventory, end
Cost of sales
GP rate (40%)
Sales

39,000.000
127,500.000
26,500.000
140,000.000
0.600
233,333.333

Collections
Accounts Receivable, beg
Sales
Write-off
Accounts Receivable, end
Collections

13,500.000
233,333.333
1,000.000
37,500.000
208,333.333

Problem 2

1.

2.

No.
1
3
4
5
7
8
9
12
Totals

AUDIT WORKING PAPER

Accounts
DR
Sales
19,900.000
Accounts Receivable
Inventory
Cost of Sales

CR
19,900.000

1,000.000
1,000.000

Details of Adjusting Entries

Sales (DR) CR
Inventory DR (CR)
Effects
overstated
-3,000.000
overstated
-2,000.000
overstated
-6,900.000
overstated
-600.000
overstated
-4,000.000
-10,000.000
5,600.000 overstated/understated
6,000.000
-4,000.000 understated/overstated
none
###
-19,900.000
1,000.000 overstated/understated

Problem 3

Problem 4

Item
Corn
Soybean
corn
Coprameal
coprameal
bonemeal
Fishmeal
Total
RMI, end
COS
COS

CALEB FEEDS, INC.

AUDIT WORKING PAPER
Qty
Freight
20,000.000
0.100
5,000.000
0.100
5,000.000
0.100
2,000.000
0.100
4,000.000
0.100
3,500.000
0.200
10,000.000
0.200

VC
5.100
12.700
5.050
5.450
5.500
15.000
13.500

417,450.000
417,450.000
53,200.000

AP
AP

53,200.000
210,000.000

COS
MI

210,000.000
22,400.000

AP

22,400.000

Amt
104,000.000
64,000.000
25,750.000
11,100.000
22,400.000
53,200.000
137,000.000
417,450.000

Problem 5

a
b
c
d
e

balance
FOH : Overstated
Understated
merchandise in transit
unrecorded purchases
purchases in june
unrecorded sales
GOC
total
OFOH
adj. balance

RM
WIP
FG
COS
395,000.000
543,000.000 403,500.000

Proposed Adjusting Entries

Operating Expense
FOH
FOH applied
COS
300000-50000=250000
FOH cost
materials cost
shipping cost
labor cost
product cost

30,000.000

-30,000.000
27,000.000

18,000.000

443,000.000
443,000.000

25,375.000
543,000.000 428,875.000

-25,375.000
-28,375.000
-250,000.000
543,000.000 428,875.000 -278,375.000

300,000.000
300,000.000
250,000.000
250,000.000

2,375.000
18,000.000
5,000.000
25,375.000

Manufacturing Overhead
Applied Manufacturing Overhead
Under-applied manufacturing overhead

1,000,000.000
950,000.000
50,000.000

Direct Labor
Overhead rate
Applied Manufacturing Overhead

2,000,000.000
0.475
950,000.000

AP

27,000.000
18,000.000

45,000.000

Problem 6
1 Raw Materials
Work-in-process
Finished Goods
Inventories

27,000.000
59,000.000
72,000.000
158,000.000

2 Raw Materials
Work-in-process
Finished Goods
Inventories

27,000.000
59,000.000
92,000.000
178,000.000

3 Purchased price
Returned goods
Total goods purchased
Cash discount (2/10,n/30)
Purchased discount - cr.

10,000.000
1,000.000
9,000.000
0.020
180.000

4 Purchased price
Returned goods
Total goods purchased
Cash discount (2/10,n/30)
Purchased discount - cr.

30,000.000
3,000.000
27,000.000
0.020
540.000

5 Physical inventory
Goods in transit
Goods out on consignment
Total Inventory

650,000.000
50,000.000
75,000.000
775,000.000

6 Physical inventory
Goods sold FOB destination
Inventory, end

475,000.000
25,000.000
500,000.000

7 Total Asset
Net income
Overstated inventory
Net income corrected

1,200,000.000
135,000.000
10,000.000
145,000.000

8 Total Asset
understated inventory end of year
corrected amount of total asset
net income
understated inventory beginning of year
understated inventory end of year
corrected net income

1,600,000.000
10,000.000
1,610,000.000
85,000.000
23,000.000
10,000.000
72,000.000

9 2015 overstated ending inventory

2015 depreciation expense
overstated net income before taxes 2014
10 2014 depreciation expense overstated
2015 overstated ending inventory
2015 depreciation expense
Understated retained earnings end of
2015

3,000.000
2,000.000
5,000.000
6,000.000
3,000.000
2,000.000
1,000.000

11 no over/understated of working capital

12 ending inventory
Cost of goods sold
selling expense
Cost of goods sold 400% of selling
expense
cost of goods available for sale
13 purchased returned
discount on purchased returned
(1200*2%)
recorded purchased return

0.000
260,000.000
150,000.000
4.000

860,000.000
1,200.000
24.000
1,176.000

14 purchased goods
purchased returned
total puchased
cash discount rate (2/10,n/30)
accounts payable

16,000.000
1,200.000
14,800.000
0.020
296.000

15 Total purchases
total units
weighted-average unit price
ending inventory balance
inventory, end

78,827.000
7,700.000
10.237
1,200.000
12,284.727

16 Total cost until January 7 (29310+20600)

units purchased as of Jan. 7 (3000+2000)
unit cost
units sold Jan. 7
cost sold
Jan. 8 cost
Jan. 26 purchased (2700units)
total cost as of Jan. 31
Total units (2500+2700)
unit cost
units sold Jan. 31
cost sold
Jan. 31 ending inventory

49,910.000
5,000.000
9.982
2,500.000
24,955.000
24,955.000
28,917.000
53,872.000
5,200.000
10.360
4,000.000
41,440.000
12,432.000

17 Total goods available for sale (520units)

ending inventory (130units)
March 16 purchased (70*4.5)
March 7 (60*4.4)
cost of goods sold
18 March 1 (100*4.2)
March 7 (30*4.4)
ending inventory LIFO (130units)
19 LIFO inventory
2014 ending inventory

600,000.000

2,275.000
315.000
264.000
1,696.000
420.000
132.000
552.000
60,000.000
40,000.000

Income before taxes greater over 10-yr

period
20 June 22 purchased (500*3.5)
June 15 purchased (800*3.4)
FIFO ending inventory
21 Total purchases
total units
unit cost
ending inventory unit
Average-cost ending inventory (diff. of
round off)

20,000.000
1,750.000
2,720.000
4,470.000
18,650.000
5,700.000
3.272
1,300.000
4,253.509

22 beg. inventory
purchases
goods sold ((400*10)-1600))
ending inventory
Unit cost of inventory under weighted
average
ending units (800-400)
ending inventory under weighted average

2,000.000
2,800.000
2,400.000
2,400.000

23 ending inventory ((800-600)*(2400/300))

Cost of goods sold ((600*10)-2700)
Total goods ((500*5)+(2400))
ending inventory under FIFO method

1,600.000
3,300.000
4,900.000
1,600.000

24 beg. units
purchased units
sold units
ending units inventory
25 cost per unit
units sold
cost of goods sold FIFO method

6.000
400.000
2,400.000

10.000
60.000
45.000
25.000
20.000
45.000
900.000

26 Total goods
total units
unit cost weighted average
units sold
cost of goods sold

47,900.000
3,700.000
12.946
2,150.000
27,833.784

27 Total goods
total units
unit cost weighted average
units sold
cost of goods sold
ending inventory

43,900.000
650.000
67.538
500.000
33,769.231
10,130.769

28 Total units available

3,700.000

units sold
ending units inventory
latest unit cost
inventory, end

2,150.000
1,550.000
13.500
20,925.000

29 Beg. inventory (200*65)

first purchase ((500-200)*68)
cost of goods sold (500units) FIFO

13,000.000
20,400.000
33,400.000

30 total goods units (1200+500+2000)

units sold
end inventory
beg. inventory (1200*12)
1st purchased ((1550-1200)*13)
ending inventory

3,700.000
2,150.000
1,550.000
14,400.000
4,550.000
18,950.000

31 merchandise purchased for sale

freight in
purchase return
inventoriable cost
32
Beg. inventory
Purchases
Freight-in
transportation to consignees
ending inventory
cost of sales
total cost of sales
33 unadjusted accounts payable
post-dated checks
purchased goods (150000*.98)
total accounts payable
34 unadjusted accounts payable
goods in transit
undelivered checks
Accounts Payable
35 unadjusted accounts payable
goods in transit FOB shipping point
goods FOB shipping point
Accounts Payable

300,000.000
8,000.000
2,000.000
306,000.000
Perez' goods
Central House Held by consignees
130,000.000
14,000.000
575,000.000
70,000.000
10,000.000
5,000.000
145,000.000
20,000.000
570,000.000
69,000.000
639,000.000
800,000.000
350,000.000
147,000.000
1,297,000.000
700,000.000
40,000.000
30,000.000
770,000.000
1,500,000.000
70,000.000
50,000.000
1,620,000.000

36 list price
trade discount (20%,10%)
purchased price

50,000.000
0.720
36,000.000

37 list price
trade discount (30%,20%)

20,000.000
0.560

cash discount (2/15,n/40)

delivery costs
purchased price
38 sales goods (1600*8)
purchased goods (4000*9.4)
ending goods inventory
ending units on hand (3200-1600+4000)
moving-average unit cost
39

0.980
400.000
11,376.000
12,800.000
37,600.000
50,400.000
5,600.000
9.000

FIFO cost is the same between perpetual and periodic

inventory
Average cost is not the same between perpetual and
periodic inventory

40 In periodic inventory system FIFO method reports the

highest amount in ending inventory and cost of sales
41 beg. inventory (450*42)
Jan. 10 purchased (150*44)
FIFO cost of sales (600units)

18,900.000
6,600.000
25,500.000

42 numerator is the ending inventory at current year cost

denominator is the ending inventory at base year cost
43
selling price
cost to sell
cost to complete
Lower-of-cost-or-net realizable value

product #1
product #2
60.000
130.000
10.000
26.000
15.000
40.000
35.000
64.000

44 Selling price
cost to sell
cost to complete
Net realizable value
cost
Lower-of-cost-or-net realizable value

25.000
6.000
4.000
15.000
18.000
15.000

45 Selling price
cost to sell
cost to complete
Net realizable value
cost
Lower-of-cost-or-net realizable value

45.000
5.000
8.000
32.000
36.000
32.000

46 Selling price
cost to sell
cost to complete
Net realizable value
cost
Lower-of-cost-or-net realizable value

50.000
5.000
9.000
36.000
32.000
32.000

47 Selling price

97.000

cost to sell
cost to complete
Net realizable value
cost
Lower-of-cost-or-net realizable value

6.000
8.000
83.000
85.000
83.000

48 Selling price
cost to sell
cost to complete
Net realizable value
cost
Lower-of-cost-or-net realizable value

101.000
8.000
10.000
83.000
86.000
83.000

49 Selling price
cost to sell
cost to complete
Net realizable value
cost
Lower-of-cost-or-net realizable value

190.000
21.000
30.000
139.000
150.000
139.000

50 Selling price
cost to sell
cost to complete
Net realizable value
cost
Lower-of-cost-or-net realizable value

190.000
11.000
20.000
159.000
150.000
150.000

51 Selling price
cost to sell
cost to complete
Net realizable value
cost
Lower-of-cost-or-net realizable value

90.000
16.000
14.000
60.000
65.000
60.000

52 Selling price
cost to sell
cost to complete
Net realizable value
cost
Lower-of-cost-or-net realizable value

7,100.000
400.000
600.000
6,100.000
6,500.000
6,100.000

53 Selling price
cost to sell
cost to complete
Net realizable value
cost
Lower-of-cost-or-net realizable value

536.000
28.000
62.000
446.000
498.000
446.000

54 Selling price
cost to sell
cost to complete
Net realizable value

568.000
38.000
53.000
477.000

cost
Lower-of-cost-or-net realizable value

502.000
477.000

55 NRV
cost
Allowance to reduce inventory to NRV

216,000.000
200,000.000
16,000.000

56 Milking cows beg.

change in FV due to growth and price
changes
harvest
milking cows end

1,176,000.000

57

change in FV due to growth and price

changes
harvest
unrealized gain on biological asset

58 unrealized gain on harvested milk (unsold)

59

change in FV due to growth and price

changes
harvest
unrealized gain on biological asset

60 unrealized gain on harvested milk (unsold)

61 purchased price
change in FV due to growth and price
changes
harvest
Llamas balance end
62

change in FV due to growth and price

changes
harvest
unrealized gain on biological asset

63 purchased price
change in FV due to growth and price
changes
harvest
Llamas balance end
64

change in FV due to growth and price

changes
harvest
unrealized gain on biological asset

65 LF purchased inventory (3000*15)

1B purchased inventory (7000*5)

365,000.000
42,000.000
1,499,000.000
365,000.000
42,000.000
323,000.000
54,000.000
242,000.000
28,000.000
214,000.000
36,200.000
148,000.000
9,400.000
1,150.000
156,250.000
9,400.000
1,150.000
8,250.000
222,000.000
14,100.000
1,750.000
234,350.000
14,100.000
1,750.000
12,350.000
45,000.000
35,000.000

total purchased at cost

unit sold LF (1000*15)
cost of LF in lump-sum cost
(45000/80000*50000*1/3)
Gross profit LF (1000/3000)

80,000.000
15,000.000
9,375.000
5,625.000

66 CF purchased inventory (3000*12)

3B purchased inventory (7000*4)
total purchased at cost
unit sold CF (1000*12)
cost of LF in lump-sum cost
(36000/64000*40000*1/3)
Gross profit LF (1000/3000)
67

36,000.000
28,000.000
64,000.000
12,000.000
7,500.000
4,500.000
M

Items
unit cost
cost
lump-sum cost allocated (48000)
items
cost per unit
68
pieces
unit price
selling price
paid pieces
pieces
unit price
selling price
cost per item
cost per item

N
4,000.000
2.500
10,000.000
9,600.000
4,000.000
2.400

Group 1
Group 2
Group 3
2,500.000
5,500.000
500.000
0.250
0.600
1.200
625.000
3,300.000
600.000
3,000.000
3,000.000 3,000.000
2,500.000
5,500.000
500.000
0.250
0.600
1.200
414.365
2,187.845
397.790
0.166
0.398
0.796
0.166

69 (refer to number 68)

0.398

70 (refer to number 68)

0.796

71 Purchased price
Market price
unrealized holding loss - dr.
Purchase Commitment Liability - cr.

2,500,000.000
2,300,000.000
200,000.000
200,000.000

72 Purchased price
Market price
Purchase Commitment Liability - dr.
Inventory - dr.
cash - cr.

2,500,000.000
2,200,000.000
300,000.000
2,200,000.000
2,500,000.000

73 contract units (pounds)

Reduction in value to MV (4-3.10)
Unrealized holding loss - dr.

O
2,000.000 6,000.000
8.000
4.000
16,000.000 24,000.000
15,360.000 23,040.000
2,000.000 6,000.000
7.680
3.840

100,000.000
0.900
90,000.000

purchase commitment liability - cr.

74 no gain or loss (not yet sold)
75 contract units (pounds)
reduction in value to MV (5-4.6)
loss

90,000.000
5.6>5
1,000.000
0.400
400.000

76 beg. inventory
net purchases
cost of sales (300000/5/3)
undamaged inventory
estimated inventory loss due to fire

50,000.000
150,000.000
180,000.000
3,000.000
17,000.000

77 beg. inventory
net purchases
cost of sales (300000/5/3)
undamaged inventory
estimated inventory loss due to fire

100,000.000
300,000.000
360,000.000
6,000.000
34,000.000

78 June total sales

cost of sale marked up (20%)
cost of goods sold

1,980,000.000
1.200
1,650,000.000

79 July total sales

cost of sale marked up (20%)
cost of goods sold
beg. inventory 30% of current cost of
goods sold
July ending inventory and purchases
August beg. inventory
cost of sale marked up (20%)
cost of goods sold
beg. inventory 30% of current cost of
goods sold
July ending inventory
merchandise purchase for july

2,040,000.000
1.200
1,700,000.000

80 Gross Profit
Purchases
ending inventory
sales
81 mark up on cost
mark up on sales on cost
equivalent mark up on selling price
82 beg. inventory
purchases
purchase return
cost of sales (300000/1.25)
ending inventory

0.700
1,190,000.000
2,160,000.000
1.200
1,800,000.000
0.300
540,000.000
1,730,000.000
360,000.000
420,000.000
240,000.000
540,000.000
0.400
1.400
0.286
220,000.000
172,000.000
8,000.000
240,000.000
144,000.000

83 beg. inventory
purchases
cost of sales (2000000*(1-.25))
ending inventory

800,000.000
1,600,000.000
1,500,000.000
900,000.000

84 cost of goods available for sales

cost of goods sold (800000*(1-.2)
ending inventory

900,000.000
640,000.000
260,000.000

85 beg. inventory
purchases
cost of sales (300000/1.25)
estimated inventory loss

50,000.000
250,000.000
240,000.000
60,000.000

86 Gross profit rate

cost of sale rate (100%-25%)
gross profit on cost

0.250
0.750
0.333

87 annual sales
Gross profit on cost
Gross profit on sale on cost
Gross profit

650,000.000
0.200
1.200
108,333.333

88 June inventory balance

purchases
cost of sales (250000*(1-.4))
inventory destroyed

320,000.000
85,000.000
150,000.000
255,000.000

89 January inventory balance

purchases
cost of sales (260000*(1-.4))
inventory destroyed

680,000.000
165,000.000
216,000.000
629,000.000

90 January inventory on hand

purchases
freight-in
cost of sales (1210000*(1-.3))
estimated inventory destroyed
91
Beg. inventory
purchases
freight-in
net markup
total goods available for sale
cost to retail ratio (858000/1322000)
sales
net markdown
estimated ending inventory
ratio
Estimated ending inventory at cost
92

1,650,000.000
683,000.000
78,000.000
847,000.000
1,564,000.000
Cost
Retail
130,000.000
198,000.000
685,000.000
1,100,000.000
43,000.000
24,000.000
858,000.000
1,322,000.000
0.649
1,050,000.000
36,000.000
236,000.000
0.649
153,167.927
Cost

Retail

Beg. inventory
purchases
freight-in
net markup
total goods available for sale
cost to retail ratio (660000/1033600)
sales
estimated ending inventory
ratio
Estimated ending inventory at cost
93
Beg. inventory
purchases
freight-in
net markup
total goods available for sale
cost to retail ratio (1398100/1715000)
sales
net markdown
estimated ending inventory
ratio
Estimated ending inventory at cost

65,500.000
568,000.000
26,500.000
660,000.000
0.639

99,000.000
865,600.000
69,000.000
1,033,600.000
811,000.000
222,600.000
0.639
142,140.093

Cost
Retail
265,600.000
326,900.000
1,068,600.000
1,386,100.000
63,900.000
2,000.000
1,398,100.000
1,715,000.000
0.815
1,302,000.000
96,300.000
316,700.000
0.815
258,179.749