Question 1 [32 marks] Topic 3: Financial report presentation and disclosure You are the chief accountant of Wesley Ltd, a big accounting firm in town. Jennifer, the trainee accountant has presented you with the balance sheet of one of your clients, Dom Ltd. The balance sheet prepared by Jennifer is shown below. Dom Ltd Statement of financial position for the year ending 30 June 2017 Assets $ Liabilities $ Cash and cash equivalents (24,000) Trade and other payables 110,000 Trade and other receivables 160,000 Allowance for inventory obsolescence 4,000 Inventories 40,000 Accumulated depreciation property, plant and equipment 60,000 Property, plant and equipment and intangible assets 764,000 Financial liabilities 600,000 Investment property 114,000 Provisions 48,000 Less: loan taken for investment property (34,000) Ordinary share capital 200,000 Other assets 46,000 Shareholders equity Retained profits 20,000 Reserves 24,000 1,066,000 1,066,000 Additional information related to Dom Ltd: (1) Cash and cash equivalents consists of $4,000 cash on hand and a bank overdraft of $28,000. (2) All receivables are expected to be received within 1 year. (3) The intangible assets included as part of the property, plant and equipment amounted to $94,000. (4) The investment property relates to a piece of land held for long-term capital appreciation purpose and all of the loans taken for the purpose of the investment property are repayable within 1 year. (5) Other assets includes $10,000 current and $36,000 non-current. (6) Included in the trade and other payables are $40,000 repayable within 1 year. (7) $100,000 included in the financial liabilities is repayable within 1 year. (8) Provisions consist of current tax liabilities of $8,000 and the balance is related to provision for a 6-month warranty on certain goods sold. Required: Write a memo to Jennifer: (a) Explain the key problems with the statement of financial position prepared by Jennifer. You should make references to requirements of AASB101, where appropriate. (b) Prepare the corrected version of the statement of financial position of Dom Ltd for the year ended 30 June 2017 and attach it to the end of the memo, for Jennifers review. Your corrected statement of financial position should be prepared in accordance with AASB101, showing only minimum line items on the face of the statement, when relevant. Notes to the accounts are not required. Question 1 Max. marks allocated Issues identified with the original statement of financial position [part (a)] 12 Preparation of corrected statement of financial position including references made to AASB101 [part (b)] 18 Overall presentation 2 Total 32