Amazing Builds Ltd is an architecture firm, operating in Nelson. The company’s Statement of Financial Position (or Balance Sheet) is presented using the Net Assets format (Equity equals Assets less Liabilities) and is shown below.

Note that balances of the accounts provided are correct, but some of the accounts may be misclassified and other accounts may have been mistakenly included in the balance sheet. Also, note that the balance for Retained Earnings has not been provided.

Amazing Builds Ltd Statement of Financial Position as at 30 June 2023
Equity
Share capital		$ 480,000
Retained earnings		$ ?
Total equity			$ ?
Assets
Current Assets
Accounts receivable		$ 217,000
Bad debt expense		$ 23,000
GST clearing*		$ 17,500
Prepaid insurance		$ 5,600
Unearned revenue		$ 6,200
Total current assets			$ ?
Non-current Assets
Bank		$ 131,500
Investments		$ 656,000
Office equipment and furniture (OEF)	$ 378,000
Less Accumulated depreciation – OEF	$ 163,000
Carrying value – OEF		$ ?
Total non-current assets			$ ?
Less: Liabilities
Current Liabilities
Accrued expenses		$ 28,000
Accrued revenue		$ 32,000
Dividends received from investments		$ 40,000
Loan – Current		$ 95,700
Total current liabilities			$ ?
Non-current Liabilities
Accounts payable		$ 102,300
Salary and wages expense		$1,371,800
Loan – Non-current		$ 346,000
Total non-current liabilities			$ ?
Net Assets			$ ?

* Note that this amount in the GST Clearing account is the balance owed to Inland Revenue.

Required:

You do not need to prepare a revised Statement of Financial Position (or Balance Sheet) to answer the following questions.

(a) Three accounts have been mistakenly included in the Statement of Financial Position. Identify these accounts that have been mistakenly included and state how the accounts should have been classified. Use the following table to format your answer.

	Name of Mistakenly Included Account	Correct Financial Statement for the Account
	1. Salaries and Wages Expense	Income Statement

Hint: The correct answer for the Salaries and Wages Expense account has given above.

(b) Five accounts have been misclassified in the Statement of Financial Position. Identify the accounts that have been misclassified and state how the accounts should have been classified. Use the following table to format your answer.

	Name of Misclassified Account	Correct Classification in the Statement of Financial Position
	1. Bank	Current Assets

Hint: The correct answer for the Bank account has given above.

(c) How much is Total Assets as at 30 June 2023? Show your workings.

(d) How much is Retained Earnings as at 30 June 2023? Show your workings.

Answer rating: 100% (QA)

a The three accounts that have been mistakenly included in the Statement of Financial Position are Salaries and Wages Expense This account should be c... View the full answer