Auditing Problems SOLUTION v.1 - 2018.docx

# Overstatement of receivable lazaro p150 x 320 units

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Overstatement of receivable Lazaro (P150 x 320 units) P48 ,000 4. A Correctly stated because the goods are considered sold in 2015. 5. D Accounts payable 135,000 Accounts receivable 135,000

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Page 4 PROBLEM 4 – HVR Company – AUDIT OF NOTES RECEIVABLE 1. D Present value of principal (P3,600,000 x 0.7514) P2,705,040 Present value of interest (P3,600,000 x 5% x 2.4860) 447 ,480 Consultation service fee revenue P3 ,152,520 2. D Interest Principal Total PVF Present Value 12/31/18 (P7.2M x 4%) P288,000 P2,400,000 P2,688,000 0.8772 P2,357,914 12/31/19 (P4.8M x 4%) 192,000 2,400,000 2,592,000 0.7695 1,994,544 12/31/20 (P2.4M x 4%) 96,000 2,400,000 2,496,000 0.6750 1,684,800 Present value of note P6,037,258 Carrying amount of equipment 4,800,000 Gain on sale of equipment P1,237,258 Note receivable from sale of land: Date Interest Income Carrying Amount 1/1/18 --- P2,181,960* 12/31/18 P218,196 2,400,156 12/31/19 239,844** 2,640,000 * P2,640,000 principal x 0.8265 PVF at 10% for 2 periods. ** P2,640,000 - P2,400,156 Note receivable from consultation: Effective Nominal Discount Carrying Date Interest Interest Amortization Amount 1/1/18 --- --- --- P3,152,520 12/31/18 P315,252 P180,000 P135,252 3,287,772 12/31/19 328,777 180,000 148,777 3,436,549 12/31/20 343,451** 180,000 163,451* 3,600,000 * P3,600,000 – P3,436,549 = P163,451 ** P163,451 + P180,000 = P343,451 Note receivable from sale of equipment: Effective Nominal Principal Carrying Date Interest Interest Amortization Collection Amount 1/1/18 --- --- --- ---- P6,037,258 12/31/18 P845,216 P288,000 P557,216 P2,400,000 4,194,474 12/31/19 587,226 192,000 395,226 2,400,000 2,189,700 12/31/20 306,300* 96,000 210,300 2,400,000 * P2,400,000 – P2,189,700 = P210,300 + P96,000 = P306,300 3. C Note receivable from consultation P3,287,772 Note receivable from sale of equipment 2 ,189,700 Noncurrent notes receivable, Dec. 31, 2018 P5 ,477,472 4. C Note receivable from sale of land P2,400,156 Note receivable from sale of equipment (P4,194,474 – P2,189,700) 2 ,004,774 Total current notes receivable, Dec. 31, 2018 P4 ,404,930 5. C Note receivable from sale of land P218,196 Note receivable from consultation 315,252 Note receivable from sale of equipment 845 ,216 Total interest income on notes receivable for 2018 P1 ,378,664
Page 5 PROBLEM NO. 5 – iBELIEVE, INC. – AUDIT OF SHAREHOLDERS’ EQUITY JOURNAL ENTRIES Jan. 1 Land 1,020,000 Organization expense 420,000 Ordinary shares (P10 x 3,000) 300,000 Share premium – ordinary 1,140,000 Feb. 23 Cash (P150 x 60,000) 9,000,000 Preference shares (P100 x 60,000) 6,000,000 Share premium – preference shares 3,000,000 Share premium – preference 450,000 Cash 450,000 Mar. 10 Cash (P390 x 18,000) 7,020,000 Ordinary shares (P10 x 18,000) 180,000 Share premium – ordinary 6,840,000 Share premium – ordinary shares 150,000 Cash 150,000 April 10 Subscriptions receivable (P450 x 24,000) 10,800,000 Subscribed ordinary shares (P10 x 24,000) 240,000 Share premium – ordinary 10,560,000 July 14 Cash 1,440,000 Ordinary shares (P10 x 3,600) 36,000 Share premium – ordinary 1,404,000 14 Building 3,060,000 Ordinary shares (P10 x 4,200) 42,000 Share premium – ordinary (P400 – P10 = P390 x 4,200) 1,638,000 Preference shares (P100 x 8,400) 840,000

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• Summer '18
• Jane
• Depreciation, 1966, Generally Accepted Accounting Principles, Turkey Bonds

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