Reference no: EM131621397
Question - 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 bank 5,000
Allowance for doubtful debts 6,000
Cash on deposits, at call 37,500
Acc. depreciation - machinery 15,250
Trade debtors 185,000
Acc. depreciation - land and building 235,000
Other debtors 38,500
Bank loans 27,750
Loan to employee 65,000
Other loans 202,500
Raw materials inventory 13,250
Trade creditors 205,000
Finished goods inventory 297,500
Provision for employee benefits 38,250
Investment in associates 108,750
Provision for restructuring 15,500
Machinery 106,500
Current and deferred tax liabilities 32,500
Land and building 525,000
Provision for warranty 10,000
Goodwill 362,500
Share capital 730,000
Dividends paid37,500
Retained earnings, 1 July 2015 190,000
Revaluation reserve 3,750 Profit for the year 70,500 1,782,000 1,782,000 Additional 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.