The records of Davis Corporation have never been audited. The company is negotiating a large loan for expansion purposes. The bank has requested that an audit of the company be performed. During the course of the audit, the following facts were determined: • The inventory at December 31, 2019, was overstated by P 10,000. • The inventory at December 31, 2020, was overstated by P 20,000. • The property, plant & equipment (an element of Selling Expense) was underdepreciated in 2019 by P 9,000 and in 2020 by P 12,000. • A three-year insurance premium of P 900 paid on January 1, 2019, was debited in full to Administrative Expense at that time.

The records of Davis Corporation have never been audited. The company is negotiating a large loan for expansion purposes. The bank has requested that an audit of the company be performed. During the course of the audit, the following facts were determined: • The inventory at December 31, 2019, was overstated by P 10,000. • The inventory at December 31, 2020, was overstated by P 20,000. • The property, plant & equipment (an element of Selling Expense) was underdepreciated in 2019 by P 9,000 and in 2020 by P 12,000. • A three-year insurance premium of P 900 paid on January 1, 2019, was debited in full to Administrative Expense at that time.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter13: Auditing Debt, Equity, And Long-term Liabilities Requiring Management Estimates

Section: Chapter Questions

Problem 28RQSC

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