Reference no: EM133113442

Question - Prepare any necessary adjustments for the following audit findings of unrecorded transactions for the year ended December 31, 2012:

a) An invoice for an insurance premium in the amount of P180,000 dated December 31, 2012. Effective date of policy 12/01/2012 - 11/30/2015. Invoice unpaid at December 31, 2012, due to the invoice being misplaced by the client. Premium was paid on January 10, 2013 and check cleared bank on January 12, 2013.

b) An invoice for 10,000 computer payroll checks in the amount of P10,000 dated December 15, 2012. Checks had been received, but audit inspection confirms that none had been used by December 31, 2012. Invoice paid on January 22, 2013.

c) An invoice for a 3-year service contract on the client's electric typewriters in the amount of P18,000, dated December 1, 2012. Effective date of service contract, 11/01/2012 - 10/31/2015. The office manager overlooked approving this invoice until the date of payment - January 10, 2013.

d) The audit of the client's SSS Premiums for December 2012, revealed that the employer's share in the amount of P10,000, had not been recorded at December 31, 2012.

e) The return of your account payable verification letter from Search, Inc. indicated a balance due of P12,000. Comparison with the client's subsidiary ledger showed a balance of P18,000. The difference was due to a client error in debiting Sink, Inc. for the P6,000 paid to Search, Inc.

f) Your examination of the Subordinated Notes Payable account at December 31, 2012 revealed the following due dates: P 1,000,000 due 11/01/2013 P 1,000,000 due 11/01/2014 P 1,000,000 due 11/01/2015

g) A review of the client's profit sharing plan revealed: 1. No contribution if profits are P250,000 or less. 2. When profits are in excess of P250,000, contribution is to be 10 percent of such excess, but not to exceed 20 percent of participants annual salary. 3. Profits are P900,000 and participants salaries are P1, 200,000. No entry has been made to date.

h) A non interest-bearing note to the president, in the amount of P240, 000 has been included in Accounts Payable - Non-trade. After discussion of this situation with board of directors on January 10, 2013, it was recorded in the minutes of that meeting, approval of the loan, but to bear interest at 9 percent per annum. The note was dated November 1, 2012, and due on demand.

i) The review of the sales bonus plan of your client revealed that no entry had been made for bonuses at December 31, 2012. the provision of the plan stipulated the following: No bonus on first P2, 500, 000 sales 10 percent on next P5,000,000 sales 5 percent on next P10,000,000 sales 2 percent on any sales in excess of P 17,500,000 sales Total audited net sales - P25,000,000 (Disregard payroll taxes.)

j) Your client is in the process of obtaining a patent on a fixture it is currently using in assembling products. This is one of many patents the client has or will secure. The legal fees, in the amount of P24,000, incurred in the determination of the patentable nature of this item, have not been paid at December 31, 2012.