Question
Presented below is the statement of financial position of Millbrook Corporation for the current year, 2027.
Millbrook Corporation Statement of Financial Position December 31, 2027 |
|---|
| Investments | 768,000 | Equity | 2,124,000 |
| Property, Plant, and Equipment | 2,064,000 | Non-current Liabilities | 1,152,000 |
| Intangible Assets | 318,000 | Current Liabilities | 456,000 |
| Current Assets | 582,000 | | |
| 3,732,000 | | 3,732,000 |
The following information is presented.
- The current assets section includes cash $180,000, accounts receivable $204,000 less $12,000 for allowance for doubtful accounts, inventory $216,000, and unearned service revenue $6,000. Inventory is stated at the lower-of-FIFO-cost-or net realizable value.
- The investments section includes land held for speculation $48,000; investments in ordinary shares, short-term (trading) $96,000 and long-term (non-trading) $324,000; and bond sinking fund $300,000. The cost and fair value of investments in ordinary shares are the same.
- Property, Plant, and equipment includes buildings $1,248,000 less accumulated depreciation $432,000, equipment $540,000 less accumulated depreciation $216,000, land $600,000, and land held for future use $324,000.
- Intangible assets include a franchise $198,000 and goodwill $120,000.
- Current liabilities include accounts payable $168,000; notes payable-short-term $96,000 and long-term $144,000; and income taxes payable $48,000.
- Non-current liabilities are composed solely of 7% bonds payable due 2035.
- Equity has share capital-preference, $5 par value, authorized 240,000 shares, issued 108,000 shares for $540,000; and share capital-ordinary, $1 par value, authorized 480,000 shares, issued 120,000 shares at an average price of $10. In addition, the company has retained earnings of $384,000.
Instructions: Prepare a statement of financial position in good form, adjusting the amounts in each statement of financial position classification as affected by the information given above.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IFRS 9 — Financial Instruments
Classification drives the accounting, so settle it first: amortised cost, fair value through profit or loss, or fair value through other comprehensive income. Only then decide where remeasurement gains and losses land, because the same price movement is reported in different places under different classifications.
Common mistakes
- Routing a fair value movement through profit or loss when the instrument is measured at FVOCI, or the reverse.
- Capitalising transaction costs on an instrument held at fair value through profit or loss, where they are expensed.
- Forgetting to remove the cumulative gain or loss from equity on the disposal of an FVOCI investment.