Adelaide Valley Wines (AVW) is a large wine producer located in South Australia. AVW produces high quality wines that have won numerous awards. It has recently changed its production process to introduce a new improved wine bottle cap that allows the wine to continue to develop in the bottle, and overcomes previous concerns that it was having with "corking", whereby air was getting into its wines through problems with the corks and causing some of its premium bottles of red wine to be undrinkable. As a result, it has started to export its premium red wine into the US export market, with prices set in US dollars. The following table summarises data extracted from the financial reports of AVW for the 2022 and 2021 financial years: 2022 (Unaudited) $000 2021 (Audited) $000 Sales 198,278 153,676 Accounts Receivable 58,500 37,324 Provision for doubtful debts (2,700) (2,450) Inventories - Raw Materials 48,699 48,417 Inventories - Work in Progress 24,714 23,510 Inventories - Finished Goods 106,914 73,642 Net Profit 35,770 31,225 REQUIRED: For accounts receivable and inventory explain why each account has been identified as having high risk and identify the key financial statement assertion at risk for each account

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Adelaide Valley Wines (AVW) is a large wine producer located in South Australia. AVW produces high quality wines that have won numerous awards. It has recently changed its production process to introduce a new improved wine bottle cap that allows the wine to continue to develop in the bottle, and overcomes previous concerns that it was having with "corking", whereby air was getting into its wines through problems with the corks and causing some of its premium bottles of red wine to be undrinkable. As a result, it has started to export its premium red wine into the US export market, with prices set in US dollars. The following table summarises data extracted from the financial reports of AVW for the 2022 and 2021 financial years:

	2022 (Unaudited) $000	2021 (Audited) $000
Sales	198,278	153,676
Accounts Receivable	58,500	37,324
Provision for doubtful debts	(2,700)	(2,450)
Inventories - Raw Materials	48,699	48,417
Inventories - Work in Progress	24,714	23,510
Inventories - Finished Goods	106,914	73,642
Net Profit	35,770	31,225

REQUIRED:

For accounts receivable and inventory explain why each account has been identified as having high risk and identify the key financial statement assertion at risk for each account.

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