Quiz 1 - ACPRE3 - 03.01.22

Tarlac Christian College
Auditing and Assurance - Concept and Apps 2 ( ACPRE3)

March 1,2022
Direction: Solve the following problems. Encircle or highlight your answer and present
your solution in paper or excel.
Problem 1:
You were able to obtain the following from accountant for Eren Corp. related to the company's
liabilities as of December 31,2021.
Accounts Payable 500,000

Notes Payable - trade 280,000
Notes Payable -bank 1,000,000
Wages and Salaries Payable 15,000
Interest Payable ?
Mortgage Note Payable - 10% 800,000
Mortgage Note Payable - 12% 2,000,000
Bonds Payable 2,000,000
The following additional information pertains to these liabilities:
a. All trade notes payable are due within six months from the end of the reporting period.
b. Bank Notes- payable include two separate notes payable to Wall Bank.
[1] A P500,000, 8% notes issued March 1,2019, payable on demand. Interest is payable every
six months.
[2] A 1-year, P500,000, 11 1/2% note issued January 2,2021.On December 31,2021,Eren
negotiated a written agreeement with Wall Bank to replace the with a 2-year, P500,000, 10%
note to be issued January 2,2022. The interest was paid on December 31,2021.
c. The 10% mortgage note was issued October 1,2018,with a term of 10 years. Terms of the note
give the holder the right to demand immediate payment if the company fails to make
monthly interest payment within 10 days of the date the payment is due. As of December
31,2021, Eren is three months behind in paying it's required interest payment.
The 12% mortgage note was issued May 1,2015, with a term of 20 years. The current principal
d. amount due is P2,000,000. Principal and interest payable anually on April 30. A payment of
P220,000 is due April 30,2022. The payment includes interest of P180,000.
e. The bonds payable is 10-year, 8% bonds, issued June 30,2021. Interest is payable semi-
annually every June 30 and December 31.
Based on the above and the result of your audit, answer the following:
1. Interest payable as of December 31,2021 is
a. P155,000 c. P160,000
b P243,333.33 d. P193,333.33
2. The portion of the Note Payable-bank to be reported under current liabilities as of December
31,2021 is
a. Nil c. P500,000
b. P300,000 d. P800,000
3.Total Current Liabilities as of December 31,2021 is

a. P3,950,000 c. P4,300,000
b. P4,328,333.33 d. P4,208,666.67
Problem 2:
Autotune Corporation is selling audio and video appliances. The Company's
fiscal year ends on March 31. The following information relates to the
obligations of the Company as of March 31,2021.
Notes Payable
Autotune has signed several long-term notes with financial institutions. The
maturities of these notes are given below. The total unpaid interest for all these
noted amounts to P408,000 on March 31,2021.
Due Date Amount

April 30, 2021 720,000
July 31, 2021 1,080,000
September 1, 2021 540,000
February 1, 2022 540,000
April 1,2022 to March 31,2023 3,240,000
Estimated Warranties
Autotune has a one-year product warranty on some selected items. The

estimated warranty liability on sales made during the 2019-2020 fiscal year and
still outstanding as of March 31,2020 amounted ti P302,400. The warranty costs
on sales made from April 1,2020 to March 31,2021, are estimated at P756,000.
The actual warranty costs incurred during 2020-2021 fiscal year are as follows.
Warranty claims honored on 2019 -2020 sales P 302,400

Warranty claims honored on 2020 -2021 sales 342,000
Trade Payables
Accounts Payable for supplies, goods, and services purchases on open account
amount to P672,000 as of March 31,2021.
Dividends
On March 31,2021, Autotune's BOD declared cash dividend of P0.30 per
ordinary share and a 10% ordinary share dividend. Both dividends were
distrubuted on April 5,2021 to shareholders on record at the close of business on
March 31,2021. As of March 31,2021, Autotune has P 6 million, P2 par value,
Based on the foregoin information, determine the adjusted balances of the following as of
March 31,2021.
1. Estimated Warranty Payable

a. P302,400 c. P 756,000
b. P414,000 d. P 1,058,400
2.Total current liabilities

a. P4,734,000 c. P6,534,000
b. P6,174,000 d. P7,734,000
3. Total non-current liabilities

a. P9,132,000 c. P7,734,000
b. P5,842,000 d. P3,240,000
Problem No. 3
On January 2,2019, Asta Company introduced new line of products that carry a
three-year warranty against factory defects.Estimated warranty costs related to
peso sales are as follows:
1% of sales in the year of sale

2% of sales in the year after sales
3% of sales in the second year after sales
Sales and actual warranty expenditures for the period 2019 to 2021 were as follows.
Actual
Warranty
Sales Expenditures
2019 P100,000 P750
2020 250,000 3750
2021 350,000 11,250
What amount should be reported as warrant expense in 2021?

a. P3,500 c. P12,750
b. P11,250 d. P21,000
Problem No. 4
The following relates to Zorro Company's obligations as of December 31,2021. For each
numbered items determine the amount if any, that should be reported as current liability
in Zorro's December 31,2021 statement of financial position.
1. Accounts Payable
Accounts per general ledger control amounted to P5,440,000, net of P240,000 debit
balances in supplier's accounts. The unpaid voucher file included the following
items that had not been recorded as of December 31,2021:
[a] A Company- P2440,000 merchandise shipped on December 31,2021, FOB
Desitination; received on January 1,2022.
[b] B, Inc. - P192,000 merchandise shipped on December 26,2021, FOB Shipping point;
received on January 1,2022.
[c] ADCD Services - P144,000 janitorial services for the three-month period ending
January 31,2022.
[d] MERALCO -P67,200 electric bill covering the period December 16,2021 to January
15,2022.
On December 28,2021, a supplier authorized Zorro to return goods billed at P160,000 and
shipped on December 20,2021. The goods were returned by Zorro on December 28,2021
but the P160,00 credit memo was not received until January 6,2022.
a. P5,601,600 c. P5,923,000
b. P5,712,000 d. P5,841,600
2. Notes Payable
A note payable to the Bank of the Philippine Islands for P2,400,000 is outstanding
on December 31,2021. The note is dated October 1,2020 bears interest at 18%, and is
payable in three equal annual installments of P800,000. The first interest and
principal payment was made on October 1,2021.
a. P800,000 c. P72,000
b. P872,000 d. P908,000
3. Product Warranty
Zorro has a one-year product warranty on selected items in it's product line. The
estimated warranty liabiliy on sales made during 2020 which was outstanding as
of December 31,2020, amounted to P416,000. The warranty costs on sales made in
2021 are estimated at P1,504,000. Actual warranty costs incurred during 2021 are as
follows:
Warranty claims honored on 2020 sales P416,000
Warrant claims honored on 2021 sales 992,000
Total Warranty claims honored P1,408,000
a. Nil c. P512,000
b. P96,000 d. P1,504,000
“Real integrity is doing the right thing, knowing that nobody’s going to
know whether you did it or not.”
-Oprah Winfrey
PADAYON FUTURE CPA'S

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Tarlac Christian College

Auditing and Assurance - Concept and Apps 2 ( ACPRE3)

Accounts Payable 500,000

The following additional information pertains to these liabilities:

1. Interest payable as of December 31,2021 is

3.Total Current Liabilities as of December 31,2021 is

Due Date Amount

Autotune has a one-year product warranty on some selected items. The

Warranty claims honored on 2019 -2020 sales P 302,400

1. Estimated Warranty Payable

2.Total current liabilities

3. Total non-current liabilities

1% of sales in the year of sale

What amount should be reported as warrant expense in 2021?

PADAYON FUTURE CPA'S

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