applied auditing problem

PROBLEM NO. 1 The following information pertain to XBORG Company's delivery trucks: Delivery Equipment DATE PARTICULARS DEBIT CREDIT 01/01/17 Trucks 1, 2, 3, and 4 P 4,800,000.00 03/15/18 Replacement of Truck 3 tires 37,500.00 07/01/18 Truck 5 1,200,000.00 07/10/18 Reconditioning of Truck 4, which was damaged in a collision 52,500.00 09/01/18 Insurance recovery on Truck 4 accident 49,500.00 10/01/18 Sale of Truck 2 900,000.00 04/01/19 Truck 6 1,500,000.00 225,000.00 05/02/19 Repainting of Truck 4 40,500.00 06/30/19 Truck 7 1,080,000.00 Accumulated Depreciation - Delivery Equipment DATE PARTICULARS DEBIT CREDIT 12/31/17 Depreciation expense 450,000.00 12/31/18 Depreciation expense 450,000.00 12/31/19 Depreciation expense 450,000.00 a On July 1, 2018, Truck 3 was traded in for a new truck, Truck 5, costing P 1,275,000; the selling party allowed a P 75,000 trade in value for the old truck. b On April 1, 2019, Truck 6 was purchased for P 1,500,000; truck 1 and cash of P 1,275,000 being given for the new truck. c The depreciation rate is 20% by unit basis. d Unit cost of trucks 1 to 4 is at P 1,200,000 each. Based on the above and the result of your audit, answer the following: 1 How much is the net loss on disposal of trucks in 2018? A P645,000 B P765,000 C P885,000 D P345,000 2 What is the loss on trade-in of Truck 1? A P435,000 B P615,000 C P375,000 D P225,000 3 What is the adjusted balance of the Delivery Equipment account as of December 31, 2019? A P5,055,000 B P3,975,000 C P4,755,000 D P6,255,000 4 The 2019 depreciation expense is understated by: A P438,000 B P378,000 C P138,000 D P558,000 5 Which of the following statement in an audit procedure to obtain a reasonable assurance about the rights and obligation of property, plant and equipment? A Determine whether liens or mortgages have been placed on property, plant and equipment by examining bank confirmations and reading minutes of the board of directors' meetings. B Review financial statements and perform analytical procedures to determine whether accounts are classified and disclosed in the financial statements in accordance with GAAP. C Analyze repairs and maintenance for expenditures that should have been capitalized. D Physically inspect the assets and examine supporting documentation for additions to property, plant and equipment