1.To establish the existence and ownership of long-term investment in the common stock of a publicly traded company, and auditor ordinarily performs a security count or

a.Relies on the client's internal controls if the auditor has reasonable assurance that the control procedures are being applied as prescribed.

b.Confirms the number of shares owned that are held by and independent custodian.

c.Determined the market price per share at the reporting date from published quotations.

d.Confirms the number of shares owned with the issuing company

2.Which of the following is considered a primary audit procedure to establish the existence and ownership of investment's?

a.Inspection of property, plant and equipment

b.Inquiry with management regarding ownership of investments

c.Inspection and count of securities

d.Recomputation of ending balance of investment

3.In confirming with and outside agent, such as financial institution, that the agent is holding investment securities in the client's name, an auditor would most likely gather evidence in support of management's financial statement assertions of existence or occurrence and:

a.Valuation or allocation.

b.Rights and obligations

c.Completeness.

d.Presentation and disclosure.

4.Ensuring that all investments owned by the entity at the reporting date are included on the statement of financial position satisfies the assertion of?

a.Valuation or allocation.

b.Rights and obligations

c.Completeness.

d.Presentation and disclosure.

5.To satisfy the valuation assertion when auditing and investment accounted for by the equity method, and auditor most likely would

a.Inspect the stock certificates evidencing the investment.

b.Examine the audited financial statements of the investee company.

c.Review the broker's advice or cancelled checks for the investment's acquisition.

d.Obtain market quotation from financial news papers or periodicals.

6.Auditor testing long-term investments would ordinarily use analytical procedures to ascertain the reasonableness of the:

a.Completeness of recorded investment income.

b.Classification between current and noncurrent portfolios.

c.Valuation of marketable equity securities.

d.Existence of unrealized gains or losses in the portfolio.

7.Of the following, which is the most efficient audit procedure for verification of interest earned on bond investment?

a.Tracing interest declarations to and independent record book.

b.Recomputing interest earned.

c.Confirming interest rate with the issuer of the bonds

d.Vouching the receipts and deposit of interest checks.

8.Which of the following is the most effective audit procedure for verification of dividends earned on the investment in equity securities?

a.Tracing deposit of dividend checks to the cash receipts book.

b.Reconciling amounts received with published dividend records.

c.Comparing the amounts received with preceding year dividends received.

d.Recomputing selected extension and footing of dividend schedules and comparing totals to the general ledger.

9.Ensuring that investments and related investment income accounts are properly classified, described and disclosed in the financial statements, including notes, in accordance with the applicable PFRS satisfies the assertion of ?

a.Valuation or allocation.

b.Rights and obligations

c.Completeness.

d.Presentation and disclosure.

10.And auditor compares annual revenues and expenses with similar amounts form the prior year and investigates all changes exceeding 10% This procedure most likely could indicate that

a.Fourth quarter payroll taxes were properly accrued and recorded, but were not paid until early in the subsequent year.

b.Unrealized gains from increase in the value of FVTOCI securities were recorded in the income account for FVTPL securities

c.The annual provision for uncollectible accounts expenses was inadequate because of worsening economic conditions.

d.Notice of an increase in property tax rates was received by management, but was not recorded until early in the subsequent year

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Problem 1. On December 31 20201, data for determined CO. includes the following:

1.Investment in bonds510,000

2.Note's receivable 450,000

3.Accounts payable450,000

4.Merchandise inventories399,000

5.Investment in equity instruments375,000

6.Biological asset360,000

7.Accounts receivable300,000

8.Investment in subsidiary210,000

9.Cash and cash equivalents210,000

10.Cash surrender value180,000

11.Deferred tax assets180,000

12.Accumulated in associate150,000

13.Investment in associate135,000

14.Claims for tax refund135,000

15.Sinking fund120,000

16.Intangible assets90,000

17.Interest receivable63,000

18.Prepaid interest (not a valuation account to financial liability) 60,000

19.Prepaid rent 60,000

20.Accrued interest expenses54,000

21.Allowance for bad debts 30,000

22.Unearned interest on receivables15,000

Questions:

Based on the data, determine the following:

1.Financial assets

a.P 2,568,000c. P 2,583,000

b.P 2,313,000d. P 2,2673,00

2.Nonfinancial assets

a.P 1,374,000c. P 1,074,000

b.P 1,465,000d. P 2,535,000

PROBLEM 2. Derecognition of financial assets- sale of investment

On January 1, 2021 haphazard Corp. owns 15,00 ordinary shares representing 15% of the shares outstanding of Luke corporation. The ordinary shares were acquired on November 12,2020 at a cost of P 1,500,000 and have a fair value of P 1,600,000 on December 31,2020. On January 2, 2021, Haphazard sold half of its investment for P 100 per share incurring a brokerage and commission expenses of P20,000.

Question:

Based on the above data, answer the following:

Case No. 1: assume that the above securities are classified as FVTPL

1.Unrealized gain ( or Loss) on December 31,2020 to be presented in the statement of financial position

a.Nilc. P( 100,00)

b.P 100,000d. P20,000

1.Gain (or loss)on sale on January 2, 2021 to be recognized in the profit or loss

a.Nilc. P (50,000)

b.P (70,000)d. P 20,000

Case No. 2: Assume that the above securities are designated as the FVTOCI

2.Unrealized gain ( or Loss) on December 31,2020 to be presented in the statement of financial position

a.Nilc. P( 100,00)

b.P 100,000d. P20,000

3.Gain (or loss)on sale on January 2, 2021 to be recognized in the profit or loss

a.Nilc. P (50,000)

b.P (70,000)d. P 20,000

PROBLEM 3. Cash & Property dividends

The following transaction transpired for Synthetic Corporation during the Year:

Synthetic Corp owns 15,000 ordinary shared representing 15% of the shares outstanding of Prowess Corporation. On December 1, 2021. Prowess declared P 2 per share dividends on ordinary shares to the shareholders of record on December 15 payable on December 31.

Synthetic Company owns 15% if of the outstanding ordinary shares of Albeit Corp. On November 1, 2021, Albeit declared its inventory as property dividends. Data relating to the fair values of the inventory follow:

DateTotal fair value of property dividends

November 1, 2021P250,000

December 31, 2021P300,000

February 15,202P 31,000

Questions:

Based on the above data, answer the following:

1.How much is the dividend income to be recognized in 2021 in relation to the Prowess investment?

a.Nilb. P 15,000

b.P 30,000d. P 7,500

2.The journal entry on December 1, 2021 in relation to the Prowess investment will include a debit to?

a.Dividend receivable - P 15,000

b.Dividend income- P 15,000

c.Cash- P 15,000

d.Investment P 15,000

3.How much is the dividend income to be recognized in 2021 in relation to Albeit investment?

a.Nil b. P 45,000

b.P 37,000d. P 46,000

4.The journal entry on December 1, 2021 in relation to the Albeit investment will include a credit to?

a.Dividend receivable P 37,500

b.Dividend income - P37,500

c.Cash P 37,500

d.None

5.The journal entry on February 15, 2022 in relation to the Albeit investment will include a debit to?

a.Noncash asset - P 37,500

b.Dividend receivable P 37,500

c.Noncash asset - 46,500

d.None