You are the chief accountant of Wisdom, a big accounting firm in town. You requested one of your trainee accountants, Matthew to prepare the balance sheet for one of your clients, DL Vision Ltd which is a manufacturing company. Matthew later presented you with the following balance sheet of DL Vision Ltd for the year ended 30 June 2016, which you are not very happy with.

DL Vision Ltd

Statement of financial position for the year ending 30 June 2016

Assets$

 Liabilities and Capital$

Cash at bank5,000

 Allowance for doubtful debts6,000

Cash on deposits, at call37,500

 Acc. depreciation – machinery15,250

Trade debtors185,000

 Acc. depreciation – land and building235,000

Other debtors38,500

 Bank loans27,750

Loan to employee65,000

 Other loans202,500

Raw materials inventory13,250

 Trade creditors205,000

Finished goods inventory297,500

 Provision for employee benefits38,250

Investment in associates108,750

 Provision for restructuring15,500

Machinery106,500

 Current and deferred tax liabilities32,500

Land and building525,000

 Provision for warranty10,000

Goodwill362,500

 Share capital730,000

Dividends paid37,500

 Retained earnings, 1 July 2015190,000

   Revaluation reserve3,750   Profit for the year70,500 1,782,000  1,782,000Additional information related to DL Vision Ltd:

• Current tax payable is $7,500 and deferred tax liability amounted to $25,000.

• Provision for warranty is in respect of a 6-month warranty on certain goods sold.

• $6,250 of bank loans is repayable within 1 year.

• $100,000 of other loans is repayable within 1 year.

• Loan to employee includes $12,500 receivable within 1 year.

• Provision for employee benefits includes $27,500 payable within 1 year.

• The planned restructuring is intended to be fully implemented within 1 year.

Required:

Write a memo to Matthew outlining the key problems with the statement of financial position prepared, with references made clearly to requirements of AASB101 where appropriate. Show the corrected version of the statement of financial position of DL Vision Ltd for the year ended 30 June 2016 and attach it at the end of the memo. Your corrected statement of financial position should be prepared in accordance with AASB101, using the captions that a listed company is likely to use. At this stage, you would not worry about the notes to the accounts.

 

Question 1Max. marks awarded

Issues identified with the original statement of financial position10

Preparation of corrected statement of financial position18Overall presentation2Total30

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Status NEW Posted 09 May 2017 08:05 AM My Price 10.00

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