Chapter 2 : Correction of Error

Problem 1
Nature of error
Net under(over)statement
Reported profit(loss)
Corrected profit(loss)

Under(Over) statement in Profit of

2012
2013
24,000
( 2,000)
300,000
(540,000)
324,000
(542,000)

2014
11,000
250,000
251,000

Retained Earnings
01/01/14
22,000

Problem 5 (Dragon Ball Company)

Net under(over)statement
Reported Profit
Corrected Profit

Under(over)statement in Profit
2012
2013
2014
(43,800)
(800)
(56,400)
450,000
290,000
440,000
406,200
289,200
383,600

RE, 1/1/14
(44,600)

Problem 7 (Gloria Company)

(b) Effect on total assets, December 31, 2013
= 16,000 + 8,000 + 20,000 2,000 = P42,000 understated
(c) Effect on total assets, December 31, 2014
= 21,000 + 12,000 + 20,000 2,000 4,000 = P47,000 understated.
(d) Effect on total liabilities, December 31, 2014
= 6,400 + 90,000 = 96,400 understated
Problem 8 Golden Crest
2013 Profit
Net under (overstatement)

(6,504)

Retained earnings,
Dec. 31, 2013
(67,804)

Non- current
Assets, 12/31/14
(144,189)

Retained earnings
January 1, 2013
(76,500)

Problem 9 (Golden Harvest Corporation)

Particulars
Net understatement (overstatement)
Reported profit (loss)
Correct profit (loss)

2013
85,667
(250,000)
164,333

2014
22,000
320,000
342,000

2015
25,000
380,000
405,000

2013
P(164,333)

2014
P117,667

2015
422,667

Retained earnings
Balance, December 31

Multiple Choice
1.
A
2.
C
3.
A
4.
A
5.
B
6.
A
7.
A
8.
B
9.
B
10.
D
11.
B
12.
B
13..
C
14.
B
15.
A
16.
D
17.
C
18.
C
19
A
20.
A

Chapter 3 : Audit of Cash

MULTIPLE CHOICE
1. C
6. B
11. B

2. B
7. C
12. C

3. D
8. C
13. C

4. A
9. C
14. D

5. B
10. D
15. D

Problem 3 Leila Corporation

b.)

Correct cash and cash equivalents

P7,112,300

Problem 4 (Sta. Monica, Inc.)

Correct balance of petty cash fund = P9,500

Problem 5 (Victor Company)
(a) Correct amount of petty cash fund

P6,400

(b)
Total per count
Cashiers accountability
Cash shortage

P11,350
11,500
P 150

Problem 6 (Rainbow Corporation)

(a)

Cash shortage

(c)

P 4,000

Correct amount of petty cash fund =

P17,500

Problem 7
Cash shortage

P 802.90

Problem 8 (Da King Company)

Cash shortage

P1,247

Correct petty cash fund balance

P5,003

Problem 9 General Company

Cash shortage
Correct petty cash fund, December 31

.............................................................. P

84.00

P 2,720.00

Problem 10 (Cisco Systems, Inc.)

Adjusted balances
(3)

Cash and cash equivalents:

P1,295,212
P1,815,212

Problem 11 (Sunshine Corporation)

1.
Cash shortage

(123,500)

3.

Additional cash shortage in January

P 85,000

Problem 12 (Pamela Manufacturing Company)

Nov. 30
786,250

Receipts
9,198,720

Disbursements.
8,601,610

Dec. 31
1,383,360

Adjusted balances

Nov. 30
2,441,000

Receipts
2,214,000

Disbursements
1,567,000

Dec. 31
3,088,000

Unadjusted book balances (squeezed)

Nov. 30
2,390,000

Receipts
2,206,000

Disbursements
1,549,000

Dec. 31
3,047,000

Adjusted Balances

Problem 13 (Golden Bells Company)

Problem 14 (Starr Company)

(a)

1.
2.
3.
4.

P463,040
P40,560
P696,000
P39,920

Problem 15 Barry Company

(1)
Deposits in transit, June 30

P 80,000

(2)
Outstanding checks, June 30

P 340,000

Adjusted balances

P 50,500

Problem 16 (Rocky Mountain High)

(a)
(b)
(c)
(d)

P148,900
P116,200
P921,500
P630,700

Problem 17
1.
2.
3.
4.
5.

A,D
C, G.
B, F
E, H
J, N

6. M, P
7. I, L
8. K, O
9. D, H
10. B, F

11.
12.
13.
14.
15.

D, F
A, D
F, G
D, F
J, N

16. I, L
17. Not a reconciling item
18. J, N
19. L, N
20. N, O

Problem 18 (Contronics Company)

Balances per audit

Petty Cash Fund

P9,000

Purchasing Fund
P15,000

Problem 19 (Fortune Company)

(b) Correct amount of cash

1,287,450

Cash in Bank
192,500

Total
P216,500

Supply the required information

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.

308.40
4,606.60
no shortage
35,000
800
5,700
400
5,300
53,800
838,600
157,950
780,650 or 761,650 (NSF checks may be treated as deduction from receipts)
625,700 or 606,700 (NSF checks may be treated as deduction from receipts)
3,000
92,000
145,600
71,950
1,828,212
imprest system deposit of collections intact to the bank
segregation of duties of custodial function and bookkeeping function
125,250
194,550
255,700
55,000