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
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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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