As a result of your preliminary assessment of audit risk and the result of your test of controls over inventory shipments and receipts, you decided to render a cut-off procedure on deliveries and receipts of goods several days before and after the balance sheet date, December 31, 2020. The inventories reported per books amounting to P234,500 was as a result of a physical count conducted on the client’s warehouse on December 30, 2020.

Audit notes:

1. All customers are within 3-5 days delivery area. Gross profit on sales is at 50%. The last. Sales invoice (SI) recorded as sales in the December Sales Journal is SI No. 20824. The following is a summary of the cut-off made on sales transactions:

SI No.	SI Date	Shipment Date	Amount	Remarks
20821	Dec. 19	Dec. 20	P 26,500	FOB Shipping Point
20822	Dec. 21	Dec. 21	30,900	FOB Destination (to consignee)
20823	Dec. 27	Dec. 29	40,500	FOB Destination (in-transit)
20824	Dec. 29	Dec. 31	20,600	FOB Shipping Point (in-transit)	118,500
20825	Dec. 31	Dec. 31	36,800	FOB Shipping Point (in-transit)
20826	Dec. 30	Dec. 30	23,600	FOB Destination (in-transit)	178,900
20827	Jan. 04	Jan. 05	20,500	FOB Shipping Point	199,400

2. All suppliers are within 3-5 days delivery area. The last Receiving Report (RR) recorded in the December Purchases Journal was RR No. 68138. The following is a summary of the cut-off made on purchases transactions:

RR No.	RR Date	Amount	Remarks
68135	Dec. 15	P 16,200	FOB Shipping Point
68136	Dec. 26	20,500	FOB Destination (from consignor)
68137	Dec. 31	19,900	FOB Destination	56,600
68138	Jan. 02	20,800	FOB Destination (in-transit)	77,400
68139	Jan. 02	25,500	FOB Destination (in-transit)
68140	Jan. 03	22,500	FOB Shipping Point (in-transit)
68141	Jan. 05	11,400	FOB Shipping Point

3. An excerpt of the Company’s trial balance revealed the following selected account balances relevant to your audit:

Sales	P 8,671,200
Purchases	4,167,900
Accounts receivable	519,800
Accounts payable	312,400
Net income	1,290,300

Requirements:

1. What is the adjusted balance of inventories as of December 31, 2020?

1. 275,200                                c) 263,400
2. 255,300                                d) 232,800

2. What is the adjusted balance of accounts receivable as of December 31, 2020?

1. a)516,100                             c) 525,700
2. b) 485,200                            d) 448,400

Accounts Receivable P519,800

Less: 30,900

Less

3. What is the adjusted balance of accounts payable as of December 31, 2020?

1. a) 293,600                                     c) 271,100
2. b) 314,400                                     d) 393,500

4. What is the adjusted net income in 2020?

1. a) 315,200                                      c) 1,283,500

b)1,295,300

Answer rating: 100% (QA)

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