Question
The following account balances were taken from the ledger of Ashford Retail plc at December 31, 2025.
| Account | Amount |
|---|
| Cash | 24,500 |
| Short-term Investments (trading securities, at fair value) | 15,000 |
| Accounts Receivable | 47,000 |
| Allowance for Doubtful Accounts | 3,000 |
| Inventory (at cost) | 58,000 |
| Prepaid Expenses | 4,300 |
| Investments in Associates | 36,000 |
| Investment in Bonds (held to 2031) | 25,000 |
| Land | 40,000 |
| Buildings | 120,000 |
| Accumulated Depreciation - Buildings | 35,000 |
| Equipment | 64,000 |
| Accumulated Depreciation - Equipment | 26,000 |
| Patents | 18,000 |
| Accounts Payable | 38,600 |
| Salaries Payable | 5,200 |
| Income Taxes Payable | 7,400 |
| Notes Payable | 60,000 |
| Bonds Payable (due 2031) | 80,000 |
| Deferred Tax Liability | 6,800 |
| Share Capital - Ordinary | 100,000 |
| Share Premium - Ordinary | 30,000 |
| Retained Earnings (before any required adjustment) | 59,800 |
Additional information:
- A year-end review determined that the net realizable value of the inventory is $52,500. The required IAS 2 write-down to the lower of cost and NRV has not yet been recorded — reflect it in both inventory and retained earnings.
- Of the $60,000 notes payable, $10,000 is due on June 30, 2026; the remainder is due in 2029.
- The investment in bonds will be held until maturity in 2031; the investments in associates are long-term.
- Show accounts receivable and property, plant and equipment items at gross less the related contra accounts.
Instructions:
Prepare a classified statement of financial position at December 31, 2025 in accordance with IAS 1.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 — offsetting and presentation
A contra account carries the opposite normal balance to the account it reduces and is presented alongside it, not merged into it. The gross amount and the contra both stay on the books so the reader can see the carrying amount and how it was arrived at.
Common mistakes
- Writing the reduction directly against the asset and losing the gross figure.
- Reporting a contra account on the wrong side of the statement, or as a liability rather than a deduction from its asset.
- Treating accumulated depreciation as an expense — it is a cumulative balance, while depreciation expense is the period charge.
Further readingStraight-line depreciation and accumulated depreciation