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c.
PROBLEM1
The following accounts were included in the unadjusted
trial balance of Bani Company as ofDecember 31, 2006:
Cash
Accounts receivable
Inventory
Accounts payable
Accrued expenses
P 481,600
1,127,000
3,025,000
2,100,500
215,500
During your audit, you noted that Bani held its cash
books open after year-end. In addition, your audit
revealed the following:
Receipts for January 2007 of P327,300 were recorded in
the December 2006 cash receipts book. The receipts of
P180,050 represent cash sales and P147,250 represent
collections from customers, net of 5% cash discounts.
Accounts payable of P186,200 was paid in January 2007.
The payments, on which discounts of P6,200 were taken,
were included in the December 2006 check register.
Merchandise inventory is valued at P3,025,000 prior to
any adjustments. The following information has been
found relating to certain inventory transactions.
a.
b.
c.
Goods
costing
P318,750
were
shipped
on December 31, 2006, and were delivered to the
customer on January 3, 2007. The terms of the invoice
were FOB shipping point. The goods were included in the
2006 ending inventory even though the sale was
recorded in 2006.
d.
e.
f.
PROBLEM 3
PROBLEM 2
During your audit of the records of the Manaoag
Corporation for the year ended December 31, 2006, the
following facts were disclosed:
Raw materials inventory, 1/1/2006
Raw materials purchases
Direct labor
Manufacturing overhead applied (150% of direct
labor)
Finished goods inventory, 1/1/2006
Selling expenses
Administrative expenses
information
from
the
Explanation
Raw materials
Work in process (80%
completed)
Finished goods
Sales, 200,000 units
c)
Units
55,000
45,000
25,000
35,000
45,000
60,000
265,000
Units
1/1/06
(3)
35,000
-
12/31/0
6
?
25,000
15,000
40,000
QUESTIONS:
In audit engagements in which interim physical
inventories are observed, a frequently used auditing
procedure is to test the reasonableness of the year-end
inventory by the application of gross profit ratio. Based
on the above and the result of your audit, you are to
provide the answers to the following:
18. The gross profit ratio for eleven months ended May
31, 2006 is
P1,
1,
1,
1,
3. 20. The June 30, 2006 inventory using the gross profit
method is