QUIZ BEE FOR 5TH YEAR 90 MINUTES ONLY AUDITING THEORY 1. An auditor compares 2002 revenues and expenses with those of the prior year and investigates all changes exceeding 10%. By this procedure the auditor would be most likely to learn that a. An increase in property tax rates has not been recognized in the client's accrual. b. The 2002 provision for uncollectible accounts is inadequate, because of worsening economic conditions. c. Fourth quarter payroll taxes were not paid. d. The client changed its capitalization policy for small tools in 2002. 2. The single feature that most clearly distinguishes auditing, attestation, and assurance is a. Type of service. b. Training required to perform the service. c. Scope of services. d. CPA’s approach to the service. 3. Which of the following is mandatory if the auditor is to comply with generally accepted auditing standards? a. Possession by the auditor of adequate technical training. b. Use of analytical review on audit engagements. c. Use of statistical sampling whenever feasible on an audit engagement. d. Confirmation by the auditor of material accounts receivable balances. 4. A conceptually logical approach to the auditor's evaluation of internal accounting control consists of the following four steps: I. Determine whether the necessary procedures are prescribed and are being followed satisfactorily. II. Consider the types of errors and fraud that could occur. III. Determine the internal control policies and procedures that should prevent or detect errors and fraud. IV. Evaluate any weakness to determine its effect on the nature, timing, or extent of auditing procedures to be applied and suggestions to be made to the client. What should be the order in which these four steps are performed? a. III, IV, I, II b. III, I, II, IV c. II, III, I, IV d. II, I, III, IV
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QUIZ BEE FOR 5TH YEAR90 MINUTES ONLY
AUDITING THEORY1. An auditor compares 2002 revenues and expenses with those of the prior year and investigates all changes exceeding
10%. By this procedure the auditor would be most likely to learn that a. An increase in property tax rates has not been recognized in the client's accrual.b. The 2002 provision for uncollectible accounts is inadequate, because of worsening economic conditions. c. Fourth quarter payroll taxes were not paid. d. The client changed its capitalization policy for small tools in 2002.
2. The single feature that most clearly distinguishes auditing, attestation, and assurance is a. Type of service.b. Training required to perform the service. c. Scope of services. d. CPA’s approach to the service.
3. Which of the following is mandatory if the auditor is to comply with generally accepted auditing standards? a. Possession by the auditor of adequate technical
training. b. Use of analytical review on audit engagements. c. Use of statistical sampling whenever feasible on an audit engagement.
d. Confirmation by the auditor of material accounts receivable balances.
4. A conceptually logical approach to the auditor's evaluation of internal accounting control consists of the following four steps: I. Determine whether the necessary procedures are prescribed and are being followed satisfactorily.
II. Consider the types of errors and fraud that could occur. III. Determine the internal control policies and procedures that should prevent or detect errors and fraud.
IV. Evaluate any weakness to determine its effect on the nature, timing, or extent of auditing procedures to be applied and suggestions to be made to the client.
What should be the order in which these four steps are performed? a. III, IV, I, II b. III, I, II, IV c. II, III, I, IV d. II, I, III, IV
5. An auditor evaluates the existing internal control in order to a. Determine the extent of substantive tests which must be performed.b. Determine the extent of control tests which must be performed. c. Ascertain whether irregularities are probable. d. Ascertain whether any employees have incompatible functions.
6. The primary reason for internal auditing's involvement in the development of new computer-based sysstems is to: a. Plan post-implementation reviews.
b. Promote adequate controls. c. Train auditors in CBIS techniques.
d. Reduce overall audit effort.
7. Random numbers can be used to select a sample only when each item in the population: a. Can be assigned to a specific stratum.
b. Is independent of outside influence.
c. Can be identified with a unique number. d. Is expected to be within plus or minus three standard deviations of the population mean.
8. The variability of a population, as measured by the standard deviation, is the a. Extent to which the individual values of the items in the population are spread about the mean. b. Degree of asymmetry of a distribution.
c. Tendency of the means of large samples (at least 30 items) to be normally distributed. d. Measure of the closeness of a sample estimate to a corresponding population characteristic.
THEORY OF ACCOUNTS
1. Initially, a foreign currency transaction shall be recorded by applying to the foreign currency amount a. The spot exchange rate at the date of transactionb. The closing rate on balance sheet datec. The average exchange rate during the yeard. The spot exchange rate at the date of the settlement of the transaction.
2. When agricultural produce is harvested, the harvest should be accounted for by using PAS 2, Inventories, or another applicable Philippine Accounting Standards. For the purpose of that Standard, cost at the date of harvest is deemed to be
a. Its fair value less costs to sell at point of harvest.b. The historical cost of the harvestc. The historical cost less accumulated impairment lossesd. Market value
3. Which of the following research and development related costs should be capitalized and amortized over current and future periods?
a. Labor and material costs incurred in building prototype modelb. Cost of testing equipment that will also be used in another separate research and development projects
scheduled to begin next year.c. Administrative salaries allocated to research and developmentd. Research findings purchased from another company to aid a particular research project currently in process.
4. AB Company prepares an account receivable aging schedule with a series of computations as follows: 2% of the total peso balance of accounts from 1-60 days past due, plus 5% of the total peso balance accounts from 61-120 days past due and so on. How would you describe the total of the amounts determined in this series of computations?
a. It is the amount of bad debts expense for the year.b. It is the amount that should be added to the allowance for doubtful accounts at year-end.c. It is the amount of the desired credit balance of the allowance for doubtful accounts to be reported in the
yearend financial statements.d. When added to the total of accounts written off during the year, this new sum is the desired credit balance of
the allowance account.
5. Which statements are incorrect regarding measurement of investment property?I. Where a property has previously been measured at fair value, it should cease to be measured at fair value, if
comparable market transactions become less frequent or market prices become less readily available.II. Gains and losses arising from changes in the fair value of investment property must be included in net profit
or loss for the period in which it arises.III. The investment property should be measured initially at cost less accumulated depreciation and impairment
losses.IV. The cost of the purchased investment property includes its purchase price and any directly attributable
expenditure.V. If payment for an investment property is deferred, its cost is equal to the total payments during the credit
period.a. IV and V only c. I, III and V onlyb. I and V only d. I IV only
6. A component of an entity is classified as discontinued operationI. When the entity has actually disposed of the operation of an operating segment
II. When the operating meets the criteria to be classified as “available for sale” a. Both I and II c. I onlyb. Neither I nor II d. II only
7. In computing the weighted-average number of shares outstanding during the year, which of the following midyear events must be treated as if it had occurred at the beginning of the year?
a. Declaration and distribution of bonus issue.b. Purchase of treasury stockc. Sale of additional ordinary shares.d. Sale of convertible preference share
8. A company with a simple capital structure for purposes of computing earnings per share would include which of the following in the computation of basic earnings per share?
a. Dividends on nonconvertible cumulative preference sharesb. Dividends on ordinary sharesc. Potential dilutersd. Number of shares of nonconvertible cumulative preference shares.
AUDITING PROBLEMS:Espie Company is a manufacturer of small tools. The following information was obtained from the company’s accounting records for the year ended December 31, 2008:
Inventory at December 31, 2008 (based on physical count in Espie’s warehouse at cost on December 31, 2008) P1,870,000
Accounts receivable at December 31, 2008 2,450,000Accounts payable at December 31, 2008 1,415,000Net sales 9,693,400Net purchases 6,734,500
Your audit reveals the following information:a. The physical count included tools to be shipped to a customer FOB shipping point on December 31, 2008. These
tools cost P64,000 and were invoiced at P78,500 and were recorded as December sales. They were physically segregated since the company awaits shipping instructions from the customer.
b. Goods shipped FOB shipping point by a vendor were in transit on December 31, 2008. These goods with invoice cost of P93,000 were shipped on December 29, 2008. The invoice for the said goods were received and recorded on January 5, 2009.
c. Work in process inventory costing P27,000 was sent to a job contractor for further processing.
d. Not included in the physical count were goods returned by customers on December 31, 2008. These goods costing P49,000 were inspected and returned to inventory on January 7, 2009. Credit memos for P67,800 were prepared and issued to the customers at that date.
e. In transit to a customer on December 31, 2008, were tools costing P17,000 shipped FOB destination on December 26, 2008. A sales invoice for P29,400 was issued and recorded on January 3, 2009, when Espie Company was notified by a customer that the tools had been received.
f. At exactly 5:00 pm on December 31, 2008, goods costing P31,200 were received from a vendor. The related invoice was recorded on December 31, 2008, but the goods were not included in the physical count.
g. Included in the physical count were goods received from a vendor on December 27, 2008. However, the related invoice for P36,000 was not recorded because the accounting department’s copy of the receiving report is yet to be received by the office.
h. A monthly freight bill for P16,000 was received on January 3, 2009. It specifically related to merchandise bought in
December 31, 2008, one-half of which was still in the inventory at December 31, 2008. The freight was not included in either the inventory or in accounts payable at December 31, 2008.
1. What is the adjusted balance of Inventory as of December 31, 2007?A 2,095,200 C 2,046,200B 2,031,200 D 2,159,200
2. What is the adjusted balance of Accounts Receivable as of December 31, 2007?A 2,450,000 C 2,303,700B 2,371,500 D 2,275,300
3. What is the adjusted balance of Accounts Payable as of December 31, 2007?A 1,552,000 C 1,467,000B 1,560,000 D 1,591,200
4. What is the adjusted balance of Accounts Payable as of December 31, 2007?A 9,614,900 C 9,625,600B 9,576,500 D 9,547,100
P21.. If the functional currency is determined to not be the foreign entity's local currency, translation is done usinga. the current rate methodb. the functional methodc. the remeasurement methodd. the derivative method
2. An economic advantage of a business combination includesa. Utilizing duplicative assets.b. Creating separate management teams.c. Coordinated marketing campaigns.d. Horizontally combining levels within the marketing chain.
5. On January 1, 20X1, Payne Corp. purchased 70% of Shayne Corp.'s $10 par common stock for $900,000. On this date, the carrying amount of Shayne's net assets was $1,000,000. The fair values of Shayne's identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net), which were $200,000 in excess of the carrying amount. For the year ended December 31, 20X1, Shayne had net income of $150,000 and paid cash dividends totaling $90,000. Excess attributable to plant assets is amortized over 10 years.In the December 31, 20X1, consolidated balance sheet, noncontrolling interest should be reported at ____.a. $282,714b. $300,500c. $397,714d. $345,500
6. Porch Company owns a 90% interest in the Screen Company. Porch sold Screen a milling machine on January 1, 20X1, for $50,000 when the book value of the machine on Porch's books was $40,000. Porch financed the sale with Screen signing a 3-year, 8% interest, note for the entire $50,000. The machine will be used for 10 years and depreciated using the straight-line method. The following amounts related to this transaction were located on the companies trial balances:
7. Company S is a 100%-owned subsidiary of Company P. Company S has outstanding 8%, 10-year bonds sold to yield 7%. On January 1 of the current year, Company P purchased all of the Company S outstanding bonds at a price that reflected the current 9% effective interest rate. How should this event be reflected in the current year's consolidated statements?a. The bonds remain in the balance sheet and are accounted for at a 7% effective rate.b. The bonds remain in the balance sheet and are accounted for at a 9% effective rate.c. Retirement of the bonds at a gain as of the purchase date.d. Retirement of the bonds at a loss as of the purchase date.
8. Partners Able, Baker, and Chapman have the following personal assets, personal liabilities, and partnership capital balances:
After applying the doctrine of marshaling of assets, the capital balances for Able, Baker, and Chapman, respectively, would bea. $50,000, $(2,000), and $58,000.b. $48,000, 0, and $58,000.c. $49,000, 0, and $57,000.d. $34,000, 0, and $54,000.
9. Maxwell is trying to decide whether to accept a salary of $60,000 or a salary of $25,000 plus a bonus of 20% of net income after salaries and bonus as a means of allocating profit among the partners. Salaries traceable to the other partners are estimated to be $75,000. What amount of income would be necessary so that Maxwell would consider the choices to be equal?a. $175,000b. $210,000c. $285,000d. $310,000
10. Contribution of a work of art to a museum for public exhibit woulda. be recognized as a contribution at fair market value.b. be recognized as operating revenue based upon admission fees.c. be recognized as an asset subject to depreciation.d. not be recognized as a contribution.
MAS1.In comparing financial and management accounting, which of the following more accurately describes management accounting information?a. historical, precise, usefulb. required, estimated, internalc. budgeted, informative, adaptabled. comparable, verifiable, monetary
2.Management and financial accounting are used for which of the following purposes?
3.Which of the following is more characteristic of a decentralized than a centralized business structure?a. The firm's environment is stable.b. There is little confidence in lower-level management to make decisions.c. The firm grows very quickly.d. The firm is relatively small.
4.Gordon Company produces three products: A, B, and C from the same process. Joint costs for this production run are $2,100.
Pounds
Sales priceper lb. atsplit-off
Disposalcost per
lb. atsplit-off
Furtherprocessingper pound
Finalsales priceper pound
A 800 $6.50 $3.00 $2.00 $ 7.50 B 1,100 8.25 4.20 3.00 10.00C 1,500 8.00 4.00 3.50 10.50
If the products are processed further, Gordon Company will incur the following disposal costs upon sale: A, $3.00; B, $2.00; and C, $1.00.
4.Refer to Gordon Company. Using a physical measurement method, what amount of joint processing cost is allocated to Product A (round to the nearest dollar)?a. $700b. $679c. $927d. $494
5..Knox Company uses 10,000 units of a part in its production process. The costs to make a part are: direct material, $12; direct labor, $25; variable overhead, $13; and applied fixed overhead, $30. Knox has received a quote of $55 from a potential supplier for this part. If Knox buys the part, 70 percent of the applied fixed overhead would continue. Knox Company would be better off bya. $50,000 to manufacture the part.b. $150,000 to buy the part.c. $40,000 to buy the part.d. $160,000 to manufacture the part.
6.Value Pro produces and sells a single product. Information on its costs follow:
Variable costs: SG&A $2 per unit Production $4 per unitFixed costs: SG&A $12,000 per year Production $15,000 per year
.Refer to Value Pro. Assume Value Pro produced and sold 5,000 units. At this level of activity, it produced a profit of $18,000. What was Value Pro's sales price per unit?a. $15.00b. $11.40c. $9.60d. $10.00
7.Ebony Company has the following expected pattern of collections on credit sales: 70 percent collected in the month of sale, 15 percent in the month after the month of sale, and 14 percent in the second month after the month of sale. The remaining 1 percent is never collected. At the end of May, Ebony Company has the following accounts receivable balances:
From April sales $21,000From May sales 48,000
Ebony's expected sales for June are $150,000. What were total sales for April?a. $150,000b. $72,414c. $70,000d. $140,000
8.Forrest Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for August when Forrest made 4,500 units:
Standard:DLH per unit 2.50Variable overhead per DLH $1.75Fixed overhead per DLH $3.10Budgeted variable overhead $21,875Budgeted fixed overhead $38,750
Actual:Direct labor hours 10,000Variable overhead $26,250Fixed overhead $38,00030.Refer to Forrest Company. Using the one-variance approach, what is the total overhead variance?a. $6,062.50 Ub. $3,625.00 Uc. $9,687.50 Ud. $6,562.50 U
9.Bush Company had beginning Work in Process Inventory of 5,000 units that were 40 percent complete as to conversion costs. X started and completed 42,000 units this period and had ending Work in Process Inventory of 12,000 units. How many units were started this period?a. 42,000b. 47,000c. 54,000d. 59,000
P11. Garcia Company began 2010 with net assets of $80,000. Net income calculated by using the capital maintenance concept was $21,000. During 2010 owners contributed $26,000 of new capital. By year-end, the net assets totaled $78,000. Dividends to the owners during 2010 werea. $49,000b. $28,000c. $23,000d. $ 2,000
2. The Steven Co. sells $50,000 of accounts receivable to a factor and receives 92% of the value of the factored accounts less a 10% commission based on the gross amount of factored accounts receivable. After the journal entry to record this factoring transaction is made, Steven Co.'s total assets will bea. reduced by $4,000b. reduced by $5,000c. reduced by $9,000
d. increased by $41,000
3. Black Company determined its December 31, 2010 inventory to be $1,000,000 based on a physical count priced at cost. It then determined the following additional information:
Merchandise costing $90,000, was shipped FOB shipping point from a vendor on December 30, 2010. This merchandise was received and recorded on January 5, 2011.
Goods costing $120,000 were staged on the shipping dock and excluded from inventory although shipment was not made until January 4, 2011. The goods were billed to the customer FOB shipping point on December 30, 2010.
What is Black's ending inventory for its December 31, 2010 balance sheet?a. $1,000,000b. $1,090,000c. $1,120,000d. $1,210,000
4. Rodriguez Company made the following payments related to a land acquisition:
Purchase price $6,000Past due taxes 500Title search 150Cost of razing old building 300Interest (incurred after productive operations had begun) 160Proceeds from salvage of old building 85
The recorded cost of the land should bea. $6,450b. $6,585c. $6,745d. $6,865
5. On April 1, 2010, Richer Corporation purchased a new machine on a deferred payment basis. A down payment of $5,000 was made and 10 monthly installments of $14,000 each are to be made beginning on May 1, 2010. The cash equivalent price of the machine was $130,000. Richer incurred and paid installation costs amounting to $6,000. The amount to be capitalized as the cost of the machine isa. $130,000b. $136,000c. $140,000d. $145,000
BLT1.Which of the following contracts is essentially gratuitous?
I. CommodatumII. PrecariumIII. DepositIV. Mutuum
a. I and II c. I, II, IIIb. I and III d. All
2.Which of the following is not an obligation with a perioda. “Payable soonest”b. An obligation payable little by littlec. Payable “within 2 years from today”d. None of the above
3.The reason why an obligation exists.a. Active Subject d. Prestationb. Passive subject e.All of the abovec. Vinculum Juris
4. 1st Statement- Taxation and Police power may be exercised simultaneously. 2nd statement- In the exercise of taxation, the state can tax anything at anytime and at any amount.
a. Both are falseb. 1st statement is false while 2nd statement is truec. 1st statement is true while 2nd statement is falsed. Both are true
5.Which of the following is not a requisite to toll the collection of tax to be made by the BIR, upon proof of the following to the Court of Tax Appeals.a. It will jeopardize the interest of the taxpayerb. It will jeopardize the interest of the governmentc.. Filling of a bond for at least double the amount of the tax assessedd. The case is not dilatory
6. 1st statement- A person may refuse to pay a tax on the ground that he receives no personal benefit from it.2nd statement- There can only be a tax if there is a law imposing the tax.
a. Both are falseb. 1st statement is false while 2nd statement is truec. 1st statement is true while 2nd statement is falsed. Both are true
QUIZ BEE FOR 5TH YEARS90 MINUTES ONLY
AUDITING THEORY1. ANSWER: D
2. ANSWER: C
3 ANSWER: A
4. ANSWER: C
5. ANSWER: A
6. ANSWER: B
7. ANSWER: C
8. ANSWER: A
THEORY OF ACCOUNTS1.
2.
3.
4.
5.
6.
7.
8.
AUDITING PROBLEMS:1. Answer D2. Answer C3. Answer B4. Answer D
P21.ANS: C DIF: M OBJ: 11-6
2.ANS: C DIF: E OBJ: 1-1
5.ANS: C DIF: M OBJ: 3-5
6.ANS: B DIF: M OBJ: 4-3
7.ANS: C DIF: E OBJ: 5-2
8.ANS: C DIF: M OBJ: 14-8
9.ANS: DMaxwell needs a $35,000 bonus to equate the “salary plus bonus” package to the “salary only” packageUsing bonus formula to solve for income:
