[PDF] EXERCISES FIRST SEMESTER BALANCE SHEET. EXERCISE 1 (LESSON

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1 DEPARTAMENTO DE CONTABILIDAD Y ECONOMÍA FINANCIERA

ESCUELA UNIVERSITARIA DE ESTUDIOS EMPRESARIALES

FINANCIAL ACCOUNTING

(DIPLOMATURA EN CIENCIAS EMPRESARIALES, 2º CURSO, GRUPO 5)

2009-2010

EXERCISES

FIRST SEMESTER

2 3

LESSON 1

CAPITAL GRANTS

EXERCISE 1 LESSON 1

The 30 of December of 2008 company SCE, Ltd. has received (in cash) a grant of 100,000 € from the local government for the acquisition of a new machinery with the same cost. The useful life of the machinery is 10 years (linear). The machinery is bought that same day.

REQUIRED:

Register the operations related to the grant in 2008, 2009 and 2010. Which is the value of the capital grant in the Balance Sheet at the end of 2010?

EXERCISE 2 LESSON 1

Company FP, Ltd. has received at the beginning of 2008 a grant of 2,500,000 € from the regional government for the acquisition of new premises with a cost of 5,000,000 €

(Constructions; 2,500,000 €; Land: 2,500,000 €). The useful life of the premises is 40 years

(linear). The premises are bought the 4 th of January and the subvention is collected in cash the 1 st of February. REQUIRED: Register the operations related to the grant in 2008 and 2009.

SOLUTION

Year 2008

- 02/01/01: Recognition of the grant as revenue directly in equity.

Nº Accounts Debit Credit

4708 Receivable from public authorities (capital grants) 2.500.000

940 Revenues of official capital grants 2.500.000

- 04/01/01: Acquisition of the premises

Nº Accounts Debit Credit

210

211 Land

Constructions 2.500.000

2.500.000

572 Cash 5.000.000

- 01/02/01: Collection of the grant

Nº Accounts Debit Credit

572 Cash 2.500.000

4708 Receivable from public authorities (capital grants) 2.500.000

31st of December: Treatment of operations related to the grant.

- Depreciation of the premises 2.500.000/40=62.500

Nº Accounts Debit Credit

681 Tangible fixed assets depreciation expense 62.500

281 Tangible fixed assets accumulated depreciation 62.500

4- For the transfer of the grant to income for the year (the grant is only financing 50% of the

construction and 50% of the land)

Nº Accounts Debit Credit

840 Transfers of official capital grants 31.250

746 Capital grants, donations and legacies transferred to

income for the year 31.250 At the end of each of the years, accounts of group 8 and 9 are closed:

Nº Accounts Debit Credit

940 Revenues of official capital grants 2.500.000

130 Official capital grants 2.500.000

Nº Accounts Debit Credit

130 Official capital grants 31.250

840 Transfers of official capital grants 31.250

Year 2009:

31st of December: Treatment of operations related to the grant.

- Depreciation of the premises 2.500.000/40=62.500

Nº Accounts Debit Credit

681 Tangible fixed assets depreciation expense 62.500

281 Tangible fixed assets accumulated depreciation 62.500

- For the transfer of the grant to income for the year (the grant is only financing 50% of the construction and 50% of the land)

Nº Accounts Debit Credit

840 Transfers of official capital grants 31.250

746 Capital grants, donations and legacies transferred to

income for the year 31.250 At the end of each of the years, accounts of group 8 and 9 are closed:

Nº Accounts Debit Credit

130 Official capital grants 31.250

840 Transfers of official capital grants 31.250

EXERCISE 3 LESSON 1

Company INXS, Ltd. has received at the beginning of 2008 a grant of 40,000 € from the regional

government for the acquisition of a new machinery with a cost of 50,000 €. The useful life of the

machinery is 4 years (linear). The grant is collected in cash the 2th of January and the machinery is bought the day after.

REQUIRED:

• Register the operations related to the grant over the useful life of the asset. • Which is the value of the capital grant in the Balance Sheet at the end of 2010? Which is the net value of the machinery at the end of 2010?

5EXERCISE 4 LESSON 1 - From exam of course 0809

The 1 st of October of 2008 company ABC, Ltd. received (in cash) a grant of 180,000 € from the local government for the acquisition of new equipment with a cost of 600,000 €. The useful life of the asset is 10 years (linear). The machinery is bought the 1 st of November of 2008.

REQUIRED:

Register the operations related to the grant in 2008 and 2009. Which is the value of the capital grant in the Balance Sheet at the end of 2010?

SOLUTION

Year 2008

- 1/10/08: Recognition of the grant as revenue directly in equity.

Nº Accounts Debit Credit

57 Cash 180,000

940 Revenues of official capital grants 180,000

- 1/11/08: Acquisition of the machinery

Nº Accounts Debit Credit

213 Machinery 600,000

572 Cash 600,000

31st of December: Treatment of operations related to the grant.

- Depreciation of the asset (600,000/10)*2/12=10,000

Nº Accounts Debit Credit

681 Tangible fixed assets depreciation expense 10,000

281 Tangible fixed assets accumulated depreciation 10,000

- For the transfer of the grant to income for the year the grant is only financing 180,000/600,000 = 30% of the asset

10,000 * 0,3 = (180,000/10)*2/12 = 3,000

Nº Accounts Debit Credit

840 Transfers of official capital grants 3,000

746 Capital grants, donations and legacies transferred to

income for the year 3,000 At the end of each of the year, accounts of group 8 and 9 are closed:

Nº Accounts Debit Credit

940 Revenues of official capital grants 180,000

130 Official capital grants 180,000

Nº Accounts Debit Credit

130 Official capital grants 3,000

840 Transfers of official capital grants 3,000

Year 2009:

31st of December: Treatment of operations related to the grant.

- Depreciation of the asset 600,000/10=60,000

Nº Accounts Debit Credit

6681 Tangible fixed assets depreciation expense 60,000

281 Tangible fixed assets accumulated depreciation 60,000

- For the transfer of the grant to income for the year the grant is only financing 180,000/600,000 = 30% of the asset

60,000 * 0,3 = 180,000/10 = 18,000

Nº Accounts Debit Credit

840 Transfers of official capital grants 18,000

746 Capital grants, donations and legacies transferred to

income for the year 18,000 At the end of each of the years, accounts of group 8 and 9 are closed:

Nº Accounts Debit Credit

130 Official capital grants 18,000

840 Transfers of official capital grants 18,000

Which is the value of the capital grant in the Balance Sheet at the end of 2010? (130) Grants, donations and legacies

3,000 transfer 2008

18,000 transfer 2009

18,000 transfer 2010 180,000 grant received 2008

141,000 Final Balance Value of the

grant at the end of 2010

EXERCISE 5 LESSON 1 - From exam of course 0809

The 1 st of July of 2008 company ABC, Ltd. has received (in cash) a grant of 800,000 € from the local government for the acquisition of a new machinery with a cost of 1,000,000 €. The useful life of the machinery is 5 years (linear). The machinery is bought that same day.

REQUIRED:

Register the operations related to the grant in 2008 and 2009. Which is the value of the capital grant in the Balance Sheet at the end of 2010?

EXERCISE 6 LESSON 1 - From exam of course 0809

The 1 st of October of 2008 company ABC, Ltd. has received (in cash) a grant of 25,000 € from the local government for the acquisition of a new machinery with a cost of 50,000 €. The useful life of the machinery is 10 years (linear). The machinery is bought that same day.

REQUIRED:

Register the operations related to the grant in 2008 and 2009. Which is the value of the capital grant in the Balance Sheet at the end of 2010? 7

LESSON 2

FINANCIAL INSTRUMENTS

EXERCISE 1 LESSON 2

Company HTM, Ltd. has acquired, the 1st of January of X5, a portfolio of bonds that are intended to be held until maturity. The nominal value in the moment of acquisition was 500,000 €, with a discount at emission of 5%. The commission paid to the dealer at the acquisition was

100 €. The bond yields no interest and the reimbursement value, the 1st of January of X10, is

600,000 €.

REQUIRED: Register the operation in years X5, X6, X7 and X8, and indicate which the amortised cost of the financial asset is at the end of X8.

EXERCISE 2 LESSON 2

Company FP, Ltd has performed the following transactions with financial instruments:

Year 200X-1

30
th

of January: Acquisition of 1,000 shares of FCC at a price of 60.5 € per share. The shares are paid in

cash. 31
st of December: The market price of the FCC's shares is 65 €.

Year 200X:

30
th of June: The shares of FCC are sold in cash at a price of 68 €. REQUIRED: Register the operations, considering the following options: A) The shares are classified by the company in the portfolio of "held for trading" financial assets. B) The shares are classified by the company in the portfolio of "available for sale" financial assets.

EXERCISE 3 LESSON 2

Company ECPN, Ltd. has performed the following operations with financial instruments:

Year 200X-1

30
th of June: Acquisition of 2 portfolios of shares of companies X and Y. The shares are paid in cash

and bought with the purpose of holding them over the long term. The values of these equity holdings at

that date are the following: o Shares of company X: 1,000,000 o Shares of company Y: 10,000 31
st of December: The fair value of the equity holdings is the following: o Shares of company X: 1,500,000 o Shares of company Y: 9,000

Year 200X:

8 31
st of December: The information regarding the equity holdings is the following: o Shares of company X: these shares are sold in cash at a price of 1,600,000 o Shares of company Y: fair value 9,500

REQUIRED: Register the operations.

EXERCISE 4 LESSON 2

Company Failed, Ltd. has received a loan from the BSCH Bank with the following conditions:

Principal amount: 100,000 €

Date of settlement = total amount in 3 years time.

Opening fees = 2,000 €.

Annual interest rate = 5%.

Required: Register the transactions related to the loan.

EXERCISE 5 LESSON 2

The following information about transactions of company SCE, Ltd. is available:

Year 200X-1

15 th of January: During the year the company has sold a portfolio of shares of company Z classified as

"available for sale" for a price of 18,000 € received in cash. The accounting value at the end of 200X-1

was 18,000 €. There were positive adjustments in value of 5,000 € for this asset that had been

recognized directly in equity in year X-2. This was the only increase/decrease in value recognized for

these stocks since it acquisition in year X-3. 30
th

of June: Acquisition of a portfolio of shares of company X for 15,000 €. The shares are paid in cash

and classified by the company in the portfolio of "available for sale" financial assets. 31
st of December: The fair value of the equity holdings (shares of company X) is 14,500 €.

Año 200X:

31
st of December: The fair value of the equity holdings (shares of company X) is 13,000 €.

REQUIRED:

Register the operations.

Which is the value of the accounts "Long-term holdings in equity" and "Adjustments for changes in value" in the Balance Sheet at the end of 200X-1 and 200X?

SOLUTION

Year 200X-1

15 th of January: Sale of portfolio of shares of company Z.

Nº Accounts Debit Credit

572 Cash 18,000

250 Long term holdings in equity instruments 18,000

Transfer of the profit that was recognized in equity in previous years:

Nº Accounts Debit Credit

802 Transfer of profits from available for sale financial assets 5,000

7632 Profits from available for sale portfolio 5,000

30
th of June: Acquisition of a portfolio of shares of company X.

9Nº Accounts Debit Credit

250 Long term holdings in equity instruments (shares of Y) 15,000

572 Cash 15,000

31
st of December: Valuation at fair value.

Nº Accounts Debit Credit

800 Losses from available for sale financial assets 500

250 Long term holdings in equity instruments (shares of X) 500

At the end of each of the year, accounts of group 8 and 9 are closed:

Nº Accounts Debit Credit

1330 Adjustments for changes in value of financial instruments

available for sale 5,000

802 Transfer of profits from available for sale financial assets 5,000

Nº Accounts Debit Credit

1330 Adjustments for changes in value of financial instruments

available for sale 500

800 Losses from available for sale financial assets 500

Year 200X:

31
st of December: Valuation at fair value.

Nº Accounts Debit Credit

800 Losses from available for sale financial assets 1,500

250 Long term holdings in equity instruments (shares of X) 1,500

At the end of each of the year, accounts of group 8 and 9 are closed:

Nº Accounts Debit Credit

1330 Adjustments for changes in value of financial instruments

available for sale 1,500

800 Losses from available for sale financial assets 1,500

Value of the accounts "Long-term holdings in equity" and "Adjustments for changes in value" in the Balance Sheet at the end of 200X-1: (250) Long term holdings in equity

18,000 Initial value

15,000 Purchase 18,000 Sale

500 Adjustment

14,500 Final balance

(133) Adjustments for changes in value

5,000 sale

500 FV 5,000 Initial value

500 Final balance

Value of the accounts "Long-term holdings in equity" and "Adjustments for changes in value" in the Balance Sheet at the end of 200X:

10(250) Long term holdings in equity

14,500 Initial value 1,500 Adjustment

13,000 Final balance

(133) Adjustments for changes in value

500 Initial value

1,500 FV

2,000 Final balance

EXERCISE 6 LESSON 2 - From exam of course 0708

Company XYZ, Ltd. has prepared the following financial Statements at the end of 2009:

ASSETS 2009 2008 LIABILITIES 2009 2008

A) NON-CURRENT ASSETS 27.150 21.050 A) EQUITY 26.352 19.975 I. Intangible assets. 3.000 3.050 A-1) Shareholders' equity. 24.327 18.425

3. Intelectual property, trademarks and others. 3.000 3.050 I. Capital. 20.000 14.700

II. Tangible fixed assets. 20.800 13.500 1. Registered capital. 20.000 20.000

1. Land and structures. 5.800 2.500 2. (Uncalled subscribed capital). - - 5.300

2. Plant and machinery, tools, furniture and other. 15.000 11.000 III. Reserves. 3.300 2.800

III. Investment property. 1.900 2.000 1. Legal and statutory. 1.800 1.800

2. Structures. 1.900 2.000 2. Other reserves. 1.500 1.000

V. Long-term financial investments. 1.450 2.500 VII. Income for the year. 1.027 925

1. Holdings in equity. 1.450 2.500 A-2) Adjustments for changes in value. 225 50

B) CURRENT ASSETS 3.222 4.025 I. Financial instruments available for sale. 225 50

II. Inventories. 1.400 900

A-3) Grants, donations and legacies

received. 1.800 1.500

1. Commercial (goods for sale). 1.400 900 B) NON-CURRENT LIABILITIES 1.500 2.500

III. Trade accounts receivables and other

receivables. 440

500 I. Long-term provisions. 500 500

1. Trade accounts receivables for sale and services. 100 200 2. Environmental actions. 500 500

3. Sundry accounts receivables. 300 250 II. Long-term debt. 1.000 2.000

4. Employee receivables. 40 50 2. Long-term debt payable to credit institutions. 1.000 2.000

V. Short-term financial investments. 60 1.050 C) CURRENT LIABILITIES 2.520 2.600

1. Holdings in equity. 600 500 III. Short-term debt. 2.010 2.010

2. Loans to companies. 550 2. Short-term debt payable to credit institutions. 2.010 2.010

VI. Accrual accounts. 10 20 V. Trade accounts payables and other. 510 590

VII. Cash and cash equivalents. 772 1.555 1. Trade accounts payables for purchases & s. 80 50

TOTAL ASSETS 30.372 25.075 3. Sundry accounts payable. 50 20

5. Liability for current tax. 300 200

6. Other payables to public authorities. 80 220

7. Customer advances. - 100

TOTAL LIABILITIES 30.372 25.075

11 2009

A) CONTINUING OPERATIONS

1. Net turnover. 4.500

a) Sales. 4.500

4. Procurements. - 1.150

a) Consumption of goods for sale. - 1.250 d) Impairment of goods for sale, raw materials and other consumables. 100

5. Other operating revenues. 350

a) Accesory and other ordinary income. 200 b) Operating subventions included in income for the year. 150

6. Personnel expenses. - 650

a) Wages, salaries and similar expenses. - 500 b) Employee welfare expenses. - 150

7. Other operating expenses. - 450

a) Outside services. - 450

8. Fixed assets depreciation expense. - 2.100

9. Transfer of grants of non-financial non-current assets and others. 500

11. Impairment and income from disposal of non-current assets. 350

a) Impairment and losses - 50 b) Income from disposals and others. 400 A.1) OPERATING INCOME (1+2+3+4+5+6+7+8+9+10+11) 1.350

12. Financial revenues. 75

a) From holdings in equity instruments. 50 a2) Of third parties. 50 b) From marketable securities and other financial instruments. 25 b 2) Of third parties. 25

13. Financial expenses. - 111

b) Of third parties. - 111

14. Change in fair value of financial instruments. 25

b) Transfer to income for the year for available for sale financial instruments. 25

16. Impairment and income from disposal of financial instruments. 150

b) Income from disposals and others. 150 A.2) FINANCIAL INCOME (12+13+14+15+16) 139

A.3) INCOME BEFORE TAXES (A.1+A.2) 1.489

17. Income tax. - 462

A.4) INCOME FROM CONTINUING OPERATIONS (A.3+17) 1.027

A.5) INCOME FOR THE YEAR (A.4+18) 1.027

Additional information (transactions of 2009):

1. Short-term holdings in equity are a portfolio of stocks classified as "held for trading". There has been

no profit or loss due to a change in the fair value of these stocks.

2. Long-term holdings in equity are a portfolio of stocks classified as "available for sale".

The portfolio includes 100 shares acquired in October of 2008 for a price of 24,5 m.u. per share.

The fair value at the end of 2008 was 25 m.u.

In June of 2009 half of the portfolio has been sold for a price of 28 m.u. per share.

The fair value at the end of 2009 is 29 m.u.

REQUIRED:

Register the operations of 2009 described in the additional information.

SOLUTION

12 Short-term holdings in equity are a portfolio of stocks classified as "held for trading". There has been no profit or loss due to a change in the fair value of these stocks.

Not relevant

Long-term holdings in equity are a portfolio of stocks classified as "available for sale". The portfolio includes 100 shares acquired in October of 2008 for a price of 24,5 m.u. per share. The fair value at the end of 2008 was 25 m.u. In June of 2009 half of the portfolio has been sold for a price of 28 m.u. per share.The fair value at the end of 2009 is 29 m.u. (250) Long term holdings in equity

2,450 Purchase

50 Adjustment

150 Adjustment

200 Adjustment

1,250 Sale

1.450 Final

balance (133) Adjustments for changes in value

175 Transfer 50

150 FV

200 FV

225 Final balance

2009 transactions:

June: valuation at fair value of ½ of the portfolio (50 shares)

Nº Accounts Debit Credit

250 Long term holdings in equity 150

900 Profits from available for sale financial assets 150

Sale:

Nº Debit Credit

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