College of Business Administration

ACTG 109A – APPLIED AUDITING

Audit of Inventories

NAME:_____________________________________________COURSE & YEAR: __________________

Problem 1
1. The following accounts were included in the unadjusted trial balance of BANGON Company as of December
31, 2017:
Cash P240,800
Accounts receivable 563,500
Inventory 1,512,500
Accounts payable 1,050,250
Accrued expenses 107,750
During your audit, you noted that BANGON held it cash books open after year-end. In addition, your audit
revealed the following:
a. Receipts during January 2018 of P163,650 were recorded in the December 2017 cash receipts book. The
receipts of P90,025 represent cash sales and P73,625 represent collections from customers, net of 5%
cash discounts.
b. Accounts payable of P93,100 was paid on January 2018. The payments, on which discounts of P3,100
were taken, were included in the December 2017 check register.
c. Merchandise inventory is valued at P1,512,500 prior to any adjustments. The following information had
been found relating to certain inventory transactions:
i. Goods valued at P68,750 are on consignment with a customer. These goods are not included in the
inventory figure.
ii. Goods costing P54,375 were received from a vendor on January 2018. The related invoice was
received and recorded on January 6, 2018. The goods were shipped on December 31, 2017, terms
fob shipping point.
iii. Goods costing P159,375 were shipped on December 31, 2017, and were delivered to the customer
on January 3, 2018. The terms of the invoice were fob shipping point. The goods were included in
the 2017 ending inventory even though the sale was recorded in 2017.
iv. A P45,500 shipment of goods to a customer on December 30, terms fob destination are not included
in the year-end inventory. The goods cost P32,500 and were delivered to the customer on January
3, 2018. The sale was properly recorded in 2018.
v. The invoice for goods costing P43,750 was received and recorded as a purchase on December 31,
2017. The related goods, shipped fob destination were received on January 4, 2018, and thus were
not included in the physical inventory.
vi. Goods valued at P153,200 are on consignment from a vendor. These goods are not included in the
physical inventory.

After your audit, determine the adjusted balances of the following as of December 31, 2017:
1. Cash
a. 240,800 c. 167,150
b. 170,250 d. 173,350
2. Accounts receivable
a. 727,150 c. 563,500
b. 641,000 d. 637,125
3. Inventory
a. 1,508,750 c. 1,465,000
b. 1,520,000 d. 1,252,500
4. Accounts payable
a. 1,197,725 c. 1,143,250
b. 1,153,975 d. 1,150,875
5. Current ratio
a. 2.00 c. 1.84
b. 1.83 d. 2.01

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