AUDIT OF RECEIVABLES
Practice Problems
PROBLEM NO.1
To substantiate the existence of accounts receivable balances as it December 31, 2017, of LUKAS
COMPANY, you have decided to send confirmation request to costumers. Below is a summary of the
confirmation replies together with the exceptions and audit findings. Gross profit on sales is 20%. The
company is under the perpetual inventory method.
Name of Balance Comments Audit Findings
Costumers Per Books from Customers
Concordia P150,000 P90,000 was returned on December 30, Returned goods were received
2017. Correct balance as is P60,000. December 31, 2017.
Falcon P30,000 Your CM representing price adjustment The CM was taken up by Lukas
dated December 28, 2017, cancels this. Company in 2018.
Lazaro P144,000 You have overpriced us by P150. The complaint is valid.
Correct price should be P300.
Silang P112,500 We received the goods only on January Term is shipping point. Shipped
6, 2018. in 2017.
Yakal P135,000 Balance was offset by our December Lukas Company credited
shipment of your raw materials. accounts payable for P135,000
to record purchases. Yakal is a
supplier.
1. If the necessary adjusting journal entry is made regarding the case of Concordia, the net income will
A. Decrease by P18,000 C. Increase by P18,000
B. Decrease by P90,000 D. Increase by 90,000
2. The effect on 2017 net income of Lukas Company of its failure to record the CM involving transaction
with Falcon:
A. P30,000 over C. P6,000 over
B. P30,000 under D. P6,000 under
3. The overstatement of receivable from Lazaro is
A. P96,000 C. P72,000
B. P24,000 D. P48,000
4. The accounts receivable from Silang is
A. Correctly stated. C. P112,500 under.
B. P112,500 over. D. P225,000 under.
5. The adjusting entry to correct the receivable from Yakal is
A. Purchases 135,000
Accounts receivable 135,000
B. Accounts payable 135,000
Purchases 135,000
C. Accounts receivable 135,000
Accounts payable 135,000
D. Accounts payable 135,000
Accounts receivable 135,000
Practice Problems
PROBLEM NO.1
To substantiate the existence of accounts receivable balances as it December 31, 2017, of LUKAS
COMPANY, you have decided to send confirmation request to costumers. Below is a summary of the
confirmation replies together with the exceptions and audit findings. Gross profit on sales is 20%. The
company is under the perpetual inventory method.
Name of Balance Comments Audit Findings
Costumers Per Books from Customers
Concordia P150,000 P90,000 was returned on December 30, Returned goods were received
2017. Correct balance as is P60,000. December 31, 2017.
Falcon P30,000 Your CM representing price adjustment The CM was taken up by Lukas
dated December 28, 2017, cancels this. Company in 2018.
Lazaro P144,000 You have overpriced us by P150. The complaint is valid.
Correct price should be P300.
Silang P112,500 We received the goods only on January Term is shipping point. Shipped
6, 2018. in 2017.
Yakal P135,000 Balance was offset by our December Lukas Company credited
shipment of your raw materials. accounts payable for P135,000
to record purchases. Yakal is a
supplier.
1. If the necessary adjusting journal entry is made regarding the case of Concordia, the net income will
A. Decrease by P18,000 C. Increase by P18,000
B. Decrease by P90,000 D. Increase by 90,000
2. The effect on 2017 net income of Lukas Company of its failure to record the CM involving transaction
with Falcon:
A. P30,000 over C. P6,000 over
B. P30,000 under D. P6,000 under
3. The overstatement of receivable from Lazaro is
A. P96,000 C. P72,000
B. P24,000 D. P48,000
4. The accounts receivable from Silang is
A. Correctly stated. C. P112,500 under.
B. P112,500 over. D. P225,000 under.
5. The adjusting entry to correct the receivable from Yakal is
A. Purchases 135,000
Accounts receivable 135,000
B. Accounts payable 135,000
Purchases 135,000
C. Accounts receivable 135,000
Accounts payable 135,000
D. Accounts payable 135,000
Accounts receivable 135,000
