Accountancy Department

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Accountancy Department
College of Business and Accountancy

Notre Dame University

Cotabato City, Philippines

CPA – MOCK BOARD EXAMINATION

AUDITING PROBLEMS MR. RONALD GERMO MAMARIL

INSTRUCTION: Select the correct answer for each of the following questions. Mark only one answer for each item by shading the box corresponding to the letter of your choice on the sheet provided. STRICLY NO ERASURES ALLOWED. Use pencil no. 1 only.

CASE 1: STOCK INVESTMENT IN SAN MIGUEL

1. The Stock Investment showed the following details during year 2008

STOCK INVESTMENT IN SAN MIGUEL

Debit Credit
Jan. 1Audited balance 4,000shares P80,000
Feb. 28Cash dividend 2,000
Mar. 31Bought shares 9,000
Apr. 1Sale of rights 6,000
June 30Sale of shares 10,000

1. A cash dividend of P0.50 per share were received on Feb. 28. The adjusting entry (assuming the use of the cost method) is:

a. Stock Investment2,000
Dividend income2,000
b. Retained earnings2,000
Dividend income2,000
c. Dividend Income2,000
Stock investment2,000
d. Cash2,000
Dividend income2,000

2. On March 15, stock rights were received entitling shareholders to purchase one share for every five held at P15 per share. Market values on this date were: shares, P20; rights, P5. The adjusting entry to recognize the cost allocated to the rights is:

a. Stock rights16,000
Stock investment16,000
b. Stock rights20,000
Stock investment20,000
c. Stock rights10,000
Stock investment10,000
d. Stock rights30,000
Stock investment30,000

3. On March 31, 600 shares were purchased with the partial exercise of these rights. The adjusting entry, after the adjustment in No. 7 above has been given effect, is

a. Stock investment18,000
Stock rights18,000
b. Stock investment12,000
Stock rights12,000
c. Stock rights12,000
Stock investment12,000
d. Stock rights15,000
Stock investment15,000

4. On April 1, the remaining rights were sold for P6, 000. The adjusting entry is:

a. Stock investment6,000
Gain on sale of rights6,000
b. Stock investment6,000
Stock rights4,000
Gain on sale of rights2,000
c. Stock investment4,000
Loss on sale of rights2,000
Stock rights6,000
d. Stock investment4,000
Gain on sale of rights4,000

5. On June 30, 460 shares were sold for P10, 000. Using the average cost method, the adjusting entry is:

a. Cash10,000
Stock investment7,500
Gain on sale of stock2,500
b. Stock investment10,000
Gain on sale of stock10,000
c. Stock investment 2,500
Gain on sale of stock 2,500
d. None of the above

CASE 2: HOME OFFICE AND ESPERANZA BRANCH

The following were found in your examination of the interplant accounts between the Home Office and Esperanza Branch.

a. Transfer of fixed assets from Home Office amounting to P53, 960 was not booked by the branch.

b. P10,000 covering marketing expenses of another branch was charged by Home Office to Esperanza.

c. Esperanza recorded a debit note on inventory transfers from Home Office of P75,000 twice.

d. Home Office recorded cash transfer of P65,700 from Esperanza Branch as coming from Upi Branch.

e. Esperanza reversed a previous debit memo from Cotabato Branch mounting to P10,500. Home Office debited that this charge is appropriately Upi Branch’s cost.

f. Esperanza recorded a debit memo from Home Office of P4, 650 as P4,650....
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