Question

We are providing you with the balance sheet of a Spanish company at the end of the year. The company carried out its accounting according to the PGC 2007. You have to analyse each of the items and specify which group of the Chart of Accounts they belong to and the specific coding that corresponds to it according to the Chart of Accounts of the General Accounting Plan to each entry.

Once all the accounts have been coded, create the closing entry for the company.

	ASSETS				LIABILITIES
Non-current assets				Net equity
Intangible fixed assets:				Equity capital:
Industrial Propriety		40.500	€	Capital Social		3.000.000	€
Cumulative depreciation II		-5.000	€	Legal reserve		348.180	€
Tangible fixed assets:				Profit and Loss		158.810	€
Constructions		3.900.000	€
ICT Equipment.		9.000	€	Non-current liability
Furniture		70.000	€	Long-term debts
Transport		35.000	€	Long-term debt to institutions.		710.000	€
Cumulative depreciation IM		-122.000	€
				Current liability
Current Asset				Short-term debts
Stock:				Short-term debts to institutions.		38.000	€
Goods		62.000	€	Suppliers		200.000	€
Impairment loses		-1.150	€	Creditors		3.560	€
Debtors:
Clients		236.200	€
Short-Term investments
Short-term investments (shares)		9.000	€
Liquidity:
Banks		225.000	€
TOTAL ASSETS		4.458.550	€	TOTAL LIABILITIES		4.458.550	€

 

 

1)    Based on the International Accounting Standards, solve the following exercises:

IAS 16. Fixed Assets. We are a graphic arts company, and at the beginning of 2016, we acquired a new printer. The price of this printer was 25,000 euros. The additional expenses of the purchase were as follows:

-       Installation and assembly: 3.000 euros.

-       Transportation and delivery: 1.150 euros.

All operations have a 21% VAT (not included), and the payment of the amounts is made by bank check.

During January, the assembly and installation of the new printer takes place, which is in perfect working condition from February the 1st.

The useful life expectancy of the printer is estimated at 10 years, and its amortisation will be carried out following the linear method. Additionally, at the end of its useful life, the company will have to face the costs of dismantling and rehabilitation of the place. Estimating said costs in 5,000 euros. Besides, said machinery requires specialised weekly maintenance, amounting to 250 euros per month.

Calculate:

-       The initial cost of the acquisition.

-       The amortization fees.

-       The costs derived from daily maintenance.

IAS 36. Impairment of assets. We are a photo studio, and due to the increase in work and staff, we have had to acquire three new cameras and accessories. The acquisition occurred in January 2018. The prices of the cameras are as follows:

-       Camera 1: 1.750 euros

-       Camera 2: 3.500 euros

-       Camera 3: 1.950 euros

-       Accessories: 4.550 euros

Calculate:

-       The impairment loss of the asset at the end of 2020, taking into account that the recoverable amount of the acquisitions is:

o   Camera 1: 575 euros

o   Camera 2: 1.500 euros

o   Camera 3: 750 euros

o   Accessories: 2.200 euros

IAS 38. Intangible Assets. On March 1, 2016, we obtained a patent for 7,500 euros.

At the close of the fiscal year, on December 31, 2016, the fair value of the patent was 9,000 euros.

As of December 31, 2017, the fair value of the patent stands at 8,000 euros.

The criterion we use for valuation after the initial recognition of the asset is the revaluation model.

Formulate:

‒        Make the accounting entries corresponding to the acquisition of the asset and at each accounting close.

Answer 1

IAS 16. Fixed assets.

The initial cost of the acquisition: 29,500 (25,000 + 3,000 + 1,500) Note: It is assumed that the value-added tax generated by all expenses should be deducted from the input credit and can be used to offset the company's VAT output liabilities, so it does not constitute a capital cost

Amortization fee. : 3,450 (29500 + 5000)/10 Note: Estimated cost at the end of the asset’s life

Daily maintenance cost: 250 Euros per month

IAS 36. Impairment of assets.

Note: The impairment of an asset is equal to a decrease in the book value of the asset so that when the recoverable value of the asset is lower than its book value, it is equal to the recoverable value of the asset.

Here, the camera was purchased in 2018 and the impairment needs to be determined in 2020. The camera will be depreciated, but we did not provide any detailed information about the useful life and depreciation method, so the following response believes that the acquisition value is equal to the book value of the asset in 2020.

Assets	Acqusition Value (Refer Note)	Recoverable Value	Impairment
Camera 1:	1,750.00	575.00	1,175.00
Camera 2:	2,500.00	1,500.00	1,000.00
Camera 3:	1,950.00	750.00	1,200.00
Accessories	4,550.00	2,200.00	2,350.00
Total	10,750.00	5,025.00	5,725.00

IAS 38. Intangible Assets.

IAS 38 provides a cost model or revaluation model method to value the initially recognized intangible sub-items. Under the revaluation model, in each balance sheet, assets are revalued at fair value with reference to the active market, and any difference is included in the revaluation surplus. The revaluation surplus is part of "comprehensive income" and is not used in the income statement.

1-Mar-16	Patent	7,500.00
	Cash / Bank		7,500.00
	(Acquisition of the patent)
31-Dec-16	Patent	1,500.00
	Revaluation Surplus		1,500.00
	(To record revaluation of the patent)
31-Dec-17	Revaluation Surplus	1,000.00
	Patent		1,000.00
	(To record revaluation of the patent)