PHILIPPINE REFINING COMPANYYou were engaged to audit the financial statements of the Philippine RefiningCompany for the year ended December 31, 2021 with comparative figures for theyear ended December 31, 2020. One of your concern regarding material risk is ontheir long-term liabilities related to the acquisition of machinery.Your examination of their books revealed that on December 31, 2019, PhilippineRefining 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 makingfour 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 foryou to test for the accuracy of their presentation and payment.PrincipalPaymentDateTotalInterestCarrying ValuePayment12/31/19 10,000.0012/31/20 28,095.4925,817.4812/31/22 23,539.4612/31/23 21,256.05Рayment9,112.056,834.044,556.022,272.6118,983.4418,983.4418,983.4418,983.4475,933.7556,950.3137,966.8718,983.4412/31/21The machine is being depreciated for 10 year life using straight-line method with nosalvage value.You recompute the depreciation based on their record and it show an annualdepreciation of P7,593.38.Interest expense was traced in the voucher register and check register with theamount the same in the table given by the accountant.The book of Philippine Refining Company was still open for the year endedDecember 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:The journal entry to record the acquisition of the machinery onDecember 31, 2019.Dec. 31, 2019Machinery 85,933.75Cash 10,000Accounts Payable 75,933.75REQUIREMENTS:What would be the audit adjustment if there is?Determine the amount of the annual payments to be made underthe financing agreement.What is the amount of the long-term liabilities as of December 31,2021?Prepare the audit adjustment at December 31, 2021 to correct theamount of machinery, long-term liabilities, and other relatedaccounts.

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

PHILIPPINE REFINING COMPANY You were engaged to audit the financial state Company for the year ended December 31, 2021 wit year ended December 31, 2020. One of your conce their long-term liabilities related to the acquisition of Your examination of their books revealed that on De Refining Company purchased machinery having a ca The company paid P10,000 down and agreed to fina four equal payments each December 31 at the implic The accountant prepared a table of payment below you to test for the accuracy of their presentation and

PHILIPPINE REFINING COMPANY You were engaged to audit the financial state Company for the year ended December 31, 2021 wit year ended December 31, 2020. One of your conce their long-term liabilities related to the acquisition of Your examination of their books revealed that on De Refining Company purchased machinery having a ca The company paid P10,000 down and agreed to fina four equal payments each December 31 at the implic The accountant prepared a table of payment below you to test for the accuracy of their presentation and

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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