Auditing Problems - Accountancy Department College of...

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Accountancy Department College of Business and Accountancy Notre Dame University Cotabato City, Philippines CPA – MOCK BOARD EXAMINATION AUDITING PROBLEMS MR. RONALD GERMO MAMARIL INSTRUCTION: Select the correct answer for each of the following questions. Mark only one answer for each item by shading the box corresponding to the letter of your choice on the sheet provided. STRICLY NO ERASURES ALLOWED. Use pencil no. 1 only. CASE 1: STOCK INVESTMENT IN SAN MIGUEL 1. The Stock Investment showed the following details during year 2008 STOCK INVESTMENT IN SAN MIGUEL Debit Credit Jan. 1 Audited balance 4,000shares P80,000 Feb. 28 Cash dividend 2,000 Mar. 31 Bought shares 9,000 Apr. 1 Sale of rights 6,000 June 30 Sale of shares 10,000 1. A cash dividend of P0.50 per share were received on Feb. 28. The adjusting entry (assuming the use of the cost method) is: a. Stock Investment 2,000 Dividend income 2,000 b. Retained earnings 2,000 Dividend income 2,000 c. Dividend Income 2,000 Stock investment 2,000 d. Cash 2,000 Dividend income 2,000 2. On March 15, stock rights were received entitling shareholders to purchase one share for every five held at P15 per share. Market values on this date were: shares, P20; rights, P5. The adjusting entry to recognize the cost allocated to the rights is: a. Stock rights 16,000 Stock investment 16,000 b. Stock rights 20,000 Stock investment 20,000 c. Stock rights 10,000 Stock investment 10,000 d. Stock rights 30,000 Stock investment 30,000 3. On March 31, 600 shares were purchased with the partial exercise of these rights. The adjusting entry, after the adjustment in No. 7 above has been given effect, is a. Stock investment 18,000 Stock rights 18,000 b. Stock investment 12,000 Stock rights 12,000 c. Stock rights 12,000 Stock investment 12,000 d. Stock rights 15,000 Stock investment 15,000
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4. On April 1, the remaining rights were sold for P6, 000. The adjusting entry is: a. Stock investment 6,000 Gain on sale of rights 6,000 b. Stock investment 6,000 Stock rights 4,000 Gain on sale of rights 2,000 c. Stock investment 4,000 Loss on sale of rights 2,000 Stock rights 6,000 d. Stock investment 4,000 Gain on sale of rights 4,000 5. On June 30, 460 shares were sold for P10, 000. Using the average cost method, the adjusting entry is: a. Cash 10,000 Stock investment 7,500 Gain on sale of stock 2,500 b. Stock investment 10,000 Gain on sale of stock 10,000 c. Stock investment 2,500 Gain on sale of stock 2,500 d. None of the above CASE 2: HOME OFFICE AND ESPERANZA BRANCH The following were found in your examination of the interplant accounts between the Home Office and Esperanza Branch. a. Transfer of fixed assets from Home Office amounting to P53, 960 was not booked by the branch. b. P10,000 covering marketing expenses of another branch was charged by Home Office to Esperanza. c. Esperanza recorded a debit note on inventory transfers from Home Office of P75,000 twice. d. Home Office recorded cash transfer of P65,700 from Esperanza Branch as coming from Upi Branch.
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Auditing Problems - Accountancy Department College of...

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