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You are the chief accountant of Wisdom, a big accounting firm in town

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Preparation of a Statement of Financial Position 


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 paid    37,500         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.

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[Solved] You are the chief accountant of Wisdom, a big accounting firm in town

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