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Problem 6

The document describes an audit of MUSIKEROS Restaurant which opened on July 1, 2018. It provides details on the owner's initial investment of $6 million (P4 million cash and P2 million equipment). In August 2018, the restaurant borrowed P5 million from a bank. During 2018, the restaurant collected P19 million in revenue, had P2 million in receivables, and P18.5 million in kitchen supplies purchases. It recorded a profit of P1.2 million in 2014. The document asks to calculate acquisition cost of new equipment, operating expenses in 2018, cash balance as of December 31, 2018, inventory as of that date, and total assets.

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455 views3 pages

Problem 6

The document describes an audit of MUSIKEROS Restaurant which opened on July 1, 2018. It provides details on the owner's initial investment of $6 million (P4 million cash and P2 million equipment). In August 2018, the restaurant borrowed P5 million from a bank. During 2018, the restaurant collected P19 million in revenue, had P2 million in receivables, and P18.5 million in kitchen supplies purchases. It recorded a profit of P1.2 million in 2014. The document asks to calculate acquisition cost of new equipment, operating expenses in 2018, cash balance as of December 31, 2018, inventory as of that date, and total assets.

Uploaded by

novy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

PROBLEM 6

Your audit of MUSIKEROS Restaurant which was established on July 1, 2018, disclosed that

the owner started with an investment totalling P6 million, composed of P4 million in cash

from his personal funds and P2 million worth of equipment. On August 1, MUSIKEROS

Restaurant borrowed P5 million from Import Bank. The loan is due in 5 equal monthly

instalment beginning September 1. Interest of P100,000 applicable to this loan was

deducted in advance from the principal amount.

During the year, MUSIKEROS collected P19 million from its customers. Amount still due from

corporate customers amounted to P2 million. Purchases for kitchen supplies inventory

amounted to P18.5 million, P2.3 million of this amount was paid by Becky in January 2019.

The restaurant operations were made at 50% above cost. The owner purchased a new

equipment on October 1, 2018. Depreciation of P80,000 was recorded for this equipment

during the year.

Equipment is depreciated using the straight-line method over a five-year life taking into account

a residual value equal to 20% of the cost. In 2014, MUSIKEROS Restaurant reported a

profit of P1.2 million.

Ignoring income tax, compute for the following:

27. Acquisition cost of the new equipment

a. P1,000,000 b. P2,000,000 c. P1,600,000 d. P800,000

28. Payment of operating expenses during 2018

a. P5,220,000 b. P5,560,000 c. P5,540,000 d. P5,460,000

29. Cash balance as of December 31, 2018

a. P240,000 b. P880,000 c. P1,440,000 d. P140,000

30. Inventory as of December 31, 2018

a. P9,250,000 b. P8,100,000 c. P2,200,000 d. P4,500,000

31. Total assets as of December 31, 2018

a. P11,500,000 b. P11,400,000 c. P10,500,000 d. P10,400,000

7 | Page

PROBLEM 7

During your audit of the records of the VOICE Corporation for the year ended December 31,

2019, the following facts were disclosed:

Raw materials inventory, 1/1/2019 P 720,200

Raw materials purchases 5,232,800


Direct labor 6,300,000

Manufacturing overhead applied (150% of direct

labor)

9,450,000

Finished goods inventory, 1/1/2019 1,240,000

Selling expenses 8,112,800

Administrative expenses 7,377,200

Your examination disclosed the following additional information:

a. Purchases of raw materials

Month Units Unit Price Amount

January – February 55,000 P17.76 P 976,800

March – April 45,000 20.00 900,000

May – June 25,000 19.60 490,000

July – August 35,000 20.00 700,000

September – October 45,000 20.40 918,000

November – December 60,000 20.80 1,248,000

265,000 P5,232,800

b. Data with respect to quantities are as follows:

Units

Explanation 1/1/19 12/31/19

Raw materials 35,000 ?

Work in process (80% completed) 0 25,000

Finished goods 15,000 40,000

Sales, 205,000 units

c. Raw materials are issued at the beginning of the manufacturing process. During the year,

no returns, spoilage, or wastage occurred. Each unit of finished goods contains one unit of

raw materials.

d. Inventories are stated at cost as follows:


 Raw materials – according to the FIFO method

 Direct labor – at an average rate determined by correlating total direct labor cost with

effective production during the period

 Manufacturing overhead – at an applied rate of 150% of direct labor cost

Based on the above and the result of your audit, answer the following:

32. The raw materials inventory as of December 31, 2019 is

a. P1,976,000 b. P1,352,000 c. P936,000 d. P897,800

33. The work in process inventory as of December 31, 2019 is

a. P1,780,000 b. P1,751,294 c. P1,885,565 d. P1,776,000

34. The finished goods inventory as of December 31, 2019 is

a. P3,352,000 b. P3,334,000 c. P3,553,130 d. P3,284,588

35. The cost of goods sold for the year ended December 31, 2019 is

a. P16,897,000

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