Question
The following adjusted balances were taken from the books of Fernbrook Ltd at December 31, 2025.
| Account | Amount |
|---|
| Cash | $25,000 |
| Accounts Receivable | 42,000 |
| Inventory | 50,000 |
| Prepaid Insurance | 3,000 |
| Equipment | 140,000 |
| Accumulated Depreciation - Equipment | 50,000 |
| Accounts Payable | 20,000 |
| Notes Payable (due 2029) | 20,000 |
| Share Capital - Ordinary | 110,000 |
| Retained Earnings | 60,000 |
Required: Prepare a statement of financial position at December 31, 2025, presenting equity before liabilities and ending with total equity and liabilities.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 — current/non-current distinction
Every asset and liability is classified current or non-current on the basis of the operating cycle and the twelve-month test. Work down the trial balance classifying each item first, and total only once the classification is settled.
Common mistakes
- Leaving the current portion of a long-term borrowing inside non-current liabilities.
- Classifying a prepayment covering more than a year entirely as current.
- Reporting an asset at gross amount where a contra account should reduce it.
Further readingPreparing a balance sheet step by step