Professional Documents
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WW INDUSTRIES
You were requested by the Board of Directors of the WW Industries to audit its books for the year ending December 31,
2014. The condensed comparative balance sheet items of the company for December 31, 2013 and 2014 are shown
below:
2014
2013
Cash
P 50,000
P 100,000
Marketable Securities
150,000
200,000
Receivables
500,000
350,000
Inventories
750,000
550,000
Property and Equipment (net)
4,750,000
3,000,000
Patents
250,000
300,000
Branch
500,000
Payables
Accrued Expenses
Bank Loan
Common Stock
Subscribed Common Stock
(net of subscriptions receivable P125,000)
Retained Earnings
Income operating and other data are:
Sales
Cost of Goods Sold
Operating Expenses, including
Depreciation
Bad Debts
Amortization of Patents
Taxes
Net Profit
Dividends
2014: Cash, P200,000; stock P200,000
900,000
50,000
3,250,000
2,000,000
160,000
40,000
2,500,000
1,500,000
225,000
525,000
300,000
-
7,500,000
4,500,000
2,535,000
250,000
20,000
50,000
400,000
465,000
400,000
5,000,000
3,200,000
1,500,000
175,000
7,500
25,000
150,000
300,000
-
4. One percent of total sales has to be setup for uncollectible accounts, the allowance of which is maintained by
the home office.
5. Accumulated depreciation balances for 2014 and 2013 were P175,000 and P350,000, respectively.
6. The bank loan carries a 20% interest per annum which was secured on July 1, 2013. The amount of P250,000 has
been paid in 2014 together with the accrued interest thereon. Interest on this loan was paid up to July 1, 2014. A
second loan worth P1,000,000 was secured on July 1, 2014 to buy additional equipment. The interest for on year
at 18% was deducted in advance and charged to operating expenses.
7. Patent amortization was charged to operations.
8. In January 2014, the company established a branch in Baguio which reported the following data on December
31, 2014:
Debit (Credit)
Cash
P 50,000
Receivables
60,000
Inventories
110,000
Furniture and Equipment (net)
400,000
Payables
Sales
Cost of goods sold
Operating expenses
(including depreciation)
(120,000)
(1,000,000)
800,000
100,000
14. Subscriptions receivable, common will be shown in the 2014 balance sheet as:
a. Deduction from subscribed common stock
b. Deduction from common stock
c. Deduction from paid in capital
d. Current asset
15. The cash shortage amounts to:
a. P 0
b. P 100
c. P 200
d. P 300
16. The marketable securities will be shown in the 2014 balance sheet at:
a. P110,000
b. P 150,000
c. P 90,000
d. P 100,000
17. Allowance for doubtful accounts will have a 2014 balance of:
a. P 85,000
b. P 75,000
c. P 74,400
d. P 84,400
18. The property and equipment original cost was:
a. P 2,075,000
b. P 3,075,000
c. P 4,825,000
d. P 3,350,000
19. Patent amortization for 2014 is:
a. P 60,000
b. P 30,000
c. P 50,000
d. P 40,000
20. Property and equipment acquired in 2014 amounted to:
a. P 4,825,000
b. P 2,400,000
c. P 2,200,000
d. P 3,675,000
21. The accrued interest on the bank loan on December 31, 2013 was:
a. P 250,000
b. P 450,000
c. P 2,200,000
d. P 325,000
22. The 2013 patent amortization was:
a. P 40,000
b. P 35,000
c. P 25,000
d. 50,000