PHILIPPINE REFINING COMPANYYou were engaged to audit the financial statements of the Philippine Refining Company forthe year ended December 31, 2021 with comparative figures for the year ended December 31,2020. One of your concern regarding material risk is on their long-term liabilities related tothe acquisition of machinery.Your examination of their books revealed that on December 31, 2019, Philippine RefiningCompany purchased machinery having a cash selling price of P85,933.75. The company paidP10,000 down and agreed to finance the remainder by making four equal payments eachDecember 31 at the implicit interest rate of 12%.The accountant prepared a table of payment below for their long-term financing for you totest for the accuracy of their presentation and payment.Interest Payment | Principal PaymentTotal Payment10,000.0028,095.4925,817.4823,539.4621,256.05Carrying Value75,933.7556,950.3137,966.8718,983.44Date12/31/1912/31/209,112.056,834.044,556.022,272.6118,983.4418,983.4418,983.4418,983.4412/31/2112/31/2212/31/23The machine is being depreciated for 10 year life using straight-line method with no salvagevalue.You recompute the depreciation based on their record and it show an annual depreciation ofP7,593.38.Interest expense was traced in the voucher register and check register with the amount thesame in the table given by the accountant.The book of Philippine Refining Company was still open for the year ended December 31,2021 report.As auditor of the company, prepare a working paper if you think the recognition andpresentation is not correct and answer the following:(1)What should be the journal entry to record the acquisition of the machinery onDecember 31, 2019.(2)What would be the audit adjustment if there is?

Name: PHILIPPINE REFINING COMPANYYou were engaged to audit the financial st
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Description: PHILIPPINE REFINING COMPANYYou were engaged to audit the financial statements of the Philippine Refining Company forthe year ended December 31, 2021 with comparative figures for the year ended December 31,2020. One of your concern regarding material

Audit -: Audit is a routine or yearly evaluation done by an auditor of the company to check if…

Answered: (1) What should be the journal entry to…

Business

Accounting

(1) What should be the journal entry to record the acquisition of the machinery on December 31, 2019.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 3P

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You were engaged to audit the financial statements of the Philippine Refining Company for the year ended December 31, 2021 with comparative figures for the year ended December 31, 2020. One of your concern regarding material risk is on their long-term liabilities related to the acquisition of machinery. Your examination of their books revealed that on December 31, 2019, Philippine Refining Company purchased machinery having a cash selling price of P85,933.75. The company paid P10,000 down and agreed to finance the remainder by making four equal payments each December 31 at the implicit interest rate of 12%. The accountant prepared a table of payment below for their long-term financing for you to test for the accuracy of their presentation and payment. Date Total Payment Interest Payment Principal Payment Carrying Valu 12/31/1910,000.00 75.933.75 12/31/20 28.095.49 9.112.05 18,983.44 $6.950.31 12/31/21 25.817.48 6.834,04 18,983.44 137.966.87 12/31/22/23.519.46 4,556,02 18.983.44…
You were engaged to audit the financial statements of the Philippines Refining Company for the year ended December 31, 2021 with comparative figures for the year ended December 31, 2020. One of your concern regarding material risk is on their long-term liabilities related to the acquisition of machinery. Your examination of their books revealed that on December 31, 2019, Philippines Refining Companypurchased machinery having a cash selling price of P85,933.75. The company paid P10,000 down and agreed to finance the remainder by making four equal payments each December 31 at the implicit interest rate of 12%. The accountant prepared a table of payment below for their long-term financing for you to test for the accuracy of their presentation and payment. Date Total Payment Interest Payment Principal Payment Carrying Value 12/31/19 10,000.00 75,933.75 12/31/20 28,095.49 9,112.05 18,983.44 56,950.31 12/31/21 25,817.48…
Jares Investments Global Limited is a listed company which manufactures stationery products. The company’s profit before tax for the year ended 31 December 2020 is GH¢16·3m and total assets as at that date are GH¢66·8m. You are an audit supervisor of Jeremiah & Associate and you are currently finalizing the audit program for the year-end audit of your existing client Jares Investments Global Limited. You attended a meeting with your audit manager where the following matters were discussed: Trade payables and accruals Jares Investments Global Limited purchases its raw materials from a large number of suppliers. The company’s policy is to close the purchase ledger just after the year end and the financial controller is responsible for identifying goods which were received pre year-end but for which no invoice has yet been received. An accrual is calculated for goods received but not yet invoiced (GRN) and is included within trade payables and accruals. The audit strategy has…
Jares Investments Global Limited is a listed company which manufactures stationery products. The company’s profit before tax for the year ended 31 December 2020 is GH¢16·3m and total assets as at that date are GH¢66·8m. You are an audit supervisor of Jeremiah & Associate and you are currently finalizing the audit program for the year-end audit of your existing client Jares Investments Global Limited. You attended a meeting with your audit manager where the following matters were discussed: Trade payables and accrualsJares Investments Global Limited purchases its raw materials from a large number of suppliers. The company’s policy is to close the purchase ledger just after the year end and the financial controller is responsible for identifying goods which were received pre year-end but for which no invoice has yet been received. An accrual is calculated for goods received but not yet invoiced (GRN) and is included within trade payables and accruals. The audit strategy has…
Jares Investments GlobalLimited is a listed company which manufactures stationery products. The company’s profit before tax for the year ended 31 December 2020is GH¢16·3m and total assets as at that date are GH¢66·8m. You are an audit supervisor of Jeremiah& Associateand you are currently finalizing the audit program for the year-end audit of your existing client Jares Investments Global Limited. You attended a meeting with your audit manager where the following matters were discussed: Trade payables and accruals Jares Investments Global Limitedpurchases its raw materials from a large number of suppliers. The company’s policy is to close the purchase ledger just after the year end and the financial controller is responsible for identifying goods which were received pre year-end but for which no invoice has yet been received. An accrual is calculated for goods received but not yet invoiced (GRN) and is included within trade payables and accruals. The audit strategy has identified a…
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You have been assigned to audit the MACHINERY account of WHITE Printing Corporation for the year ended December 31, 2020. In the course of your examination, you found out that your client acquired on July 1, 2020 three printing machines for a list price of ₱280,000 with a 10% trade discount, term 2/10, n/60. The liability was fully paid on September 1, 2020. In addition, freight charges of ₱1,040 and cost of installation of P5,000 were paid. The client recorded the transactions under machinery account for ₱280,440. How much is the Machinery account overstated?
Truth Corp. is in the process of preparing its financial statements for the year ended December 31, 2020. The following represent various information about the entity’s intangible assets. On May 1, 2020, Truth sold a patent in exchange for a P5,000,000 non-interest bearing note due on May 1, 2023. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at May 1, 2020 was 14%. The collection of the note receivable is reasonably assured. The patent was purchased for P3,150,000 on September 1, 2016. On that date, the remaining legal life was fifteen years, which was also determined to be the useful life. In 2020, Truth developed a new machine and secured a patent for it. The following expenses were incurred in developing and patenting the machine: Research and development laboratory expenses P1,500,000 Metal used in the construction of the machine 480,000…
You were auditing the borrowings of Faith Logistics Corporation for the year ended December 31, 2022. You were able to not the following transaction in your review of the company’s records: On August 1, 2022, the company acquired a service vehicle for a total cash price of P650,000 with Alpha Automobile Trading Company. The terms involved a deferred payment arrangement on the purchase of the service vehicle with Faith paying a down payment of P150,000 and a five-year note payable of P626,140. The note is payable in five (5) equal installments of P125,228 payable beginning August 1, 2023. The annual payments include 8% interest. What is the cost of the equipment to be recorded by Faith Logistics Corporation on August 1, 2022? What is the carrying amount of the note payable on December 31, 2022?
You were auditing the borrowings of Faith Logistics Corporation for the year ended December 31, 2022. You were able to not the following transaction in your review of the company’s records: On August 1, 2022, the company acquired a service vehicle for a total cash price of P650,000 with Alpha Automobile Trading Company. The terms involved a deferred payment arrangement on the purchase of the service vehicle with Faith paying a down payment of P150,000 and a five-year note payable of P626,140. The note is payable in five (5) equal installments of P125,228 payable beginning August 1, 2023. The annual payments include 8% interest. Based on the given information and the result of your audit, answer the following questions: What is the cost of the equipment to be recorded by Faith Logistics Corporation on August 1, 2022? What is the carrying amount of the note payable on December 31, 2022? How much is the interest expense to be reported by the company for the year ended December 31,…
You were auditing the borrowings of Faith Logistics Corporation for the year ended December 31, 2022. You were able to not the following transaction in your review of the company’s records: On August 1, 2022, the company acquired a service vehicle for a total cash price of P650,000 with Alpha Automobile Trading Company. The terms involved a deferred payment arrangement on the purchase of the service vehicle with Faith paying a down payment of P150,000 and a five-year note payable of P626,140. The note is payable in five (5) equal installments of P125,228 payable beginning August 1, 2023. The annual payments include 8% interest. How much is the amount attributable to the principal portion of the note on the payment made on August 1, 2023?
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