11. Which of the following control activities most likely would justify a reduced level of control risk concerning property, plant and equipment acquisitions? *

a. Periodic physical inspection of PPE by the internal audit staff.

b. Approval of periodic depreciation entries by a supervisor independent of the accounting department.

c. The review of prenumbered purchase orders to detect unrecorded trade-ins.

d. Comparison of current year PPE account balances with prior-year figures.

For items 12 to 13 please refer to the following information: In 2016, GREEN CORPORATION acquired a silver mine in Benguet. Because the mine is located deep in the Benguet mountains, Green was able to acquire the mine for the low price of P50,000.In 2017, Green constructed a road to the silver mine costing P5,000,000. Improvements to the mine made in 2017 cost P750,000. Because of the improvements to the mine and the surrounding land, it is estimated that the mine can be sold for P600,000 when the mining activities are complete. During 2018, five buildings were constructed near the mine site to house the mine workers and their families. The total cost of the five buildings was P1,500,000. Estimated residual value is P250,000. In 2016, geologists estimated 4 million tons of silver ore could be removed from the mine for refining. During 2019, the first year of operations, only 5,000 tons of silver ore were removed from the mine. However, in 2020, workers mined 1 million tons of silver. During that same year, geologists discovered that the mine contained 3 million tons of silver ore in addition to the original 4 million tons. Improvements of P275,000 were made to the mine early in 2020 to facilitate the removal of the additional silver. Early in 2020, an additional building was constructed at a cost of P225,000 to house the additional workers needed to excavate the added silver. This building is not expected to have any residual value. In 2021, 2.5 million tons of silver were mined and costs of P1,100,000 were incurred at the beginning of the year for improvements to the mine. Based on the above and the result of your audit, determine the following: (Round off depletion and depreciation rates to two decimal places.)

12. Depletion for 2021 *

A. P1,950,000

B. P2,150,000

C. P2,425,000

D. P2,275,000

13. Depreciation for 2021 *

A. P525,000

B. P625,000

C. P1,225,000

D. P450,000

14. Based on an observation made during an audit, an independent auditor should discuss with management the effectiveness of control procedures that prevent the purchase of *

a. Supplies purchased from a vendor who offers no trade or cash discounts.

b. Inventory acquired just in time.

c. Equipment that is needed but does not qualify for investment tax credit.

d. Supplies ordered without considering potential volume discounts.

15. A weakness in internal control over recording retirement of equipment may cause an auditor to *

a. Inspect certain items of equipment in the plant and trace those items to the accounting records.

b. Review the subsidiary ledger to ascertain whether depreciation was taken on each item of equipment during the year.

c. Trace additions to the other assets account to search for equipment that is still on hand but no longer being used.

d. Select certain items of equipment from the accounting records and locate them in the plant.

16. When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually perform *

a. Tests of controls and extensive tests of property and equipment balances at the end of the year.

b. Analytical procedures for current year property and equipment transactions.

c. Tests of controls and limited tests of current year property and equipment transactions.

d. Analytical procedures for property and equipment balances at the end of the year.

17. Recorded entries in which of the following accounts are most likely to relate to the property, plant and equipment completeness assertion? *

a. Allowance for bad debts

b. Repairs and maintenance expense

c. Marketable securities

d. Prepaid insurance

18. Analysis of which account is least likely to reveal evidence relating to recorded retirement of equipment? *

a. Accumulated depreciation

b. Insurance expense

c. Property, plant and equipment

d. Purchase returns and allowances

19. Which of the following explanations most likely would satisfy an auditor who questions management about significant debits to the accumulated depreciation accounts? *

a. The estimated remaining useful lives of plant assets were revised upward.

b. Plant assets were retired during the year.

c. The prior year's depreciation expense was erroneously understated.

d. Overhead allocations were revised at year - end.

20. For effective internal control, the accounts payable department generally should *

a. Stamp, perforate, or otherwise cancel supporting documentation after payment is mailed.

b. Ascertain that each requisition is approved as to price, quantity, and quality by an authorized employee.

c. Obliterate the quantity ordered on the receiving department copy of the purchase order.

d. Establish the agreement of the vendor's invoice with the receiving report and purchase order.