Cases
Practical case
Imprimerie Lumen (a fictitious company) operates an offset press acquired on 1 January 20X1 for 900,000, depreciated on a straight-line basis over 10 years with a residual value of 50,000. It applies the cost model and its reporting date is 31 December. At the start of 20X4, the arrival of more efficient digital presses leads management to review its estimates. The financial controller passes you the file with several proposals.
Your assignment
Analyse the technical report and the financial controller's proposals. Some information is irrelevant and one item is missing: identify it and state the assumption you make. Then determine the 20X4 charge, the entry and the disclosure required.
Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.
Advanced level: no help, the work is grouped by kind.
4 documents: open each one to read it.
Document 1Extract
Acquisition date: 1 January 20X1. Cost: 900,000. Original useful life: 10 years. Original residual value: 50,000. Method: straight-line, annual charge 85,000. Accumulated depreciation at 31 December 20X3: 255,000.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Cost of the press | €900,000.00 | |
| Original useful life | 10 years | |
| Original residual value | €50,000.00 | |
| Original annual charge | €85,000.00 | |
| Accumulated depreciation at 31 December 20X3 | €255,000.00 | |
| Revised remaining useful life | 4 years | |
| Revised residual value (current second-hand price) | €20,000.00 | |
| Stable volume printed | Yes | |
| Four proposals to assess | P1-P4 | |
| Insured value | €1,100,000.00 | |
| Fair value estimated by the insurer | €520,000.00 |
Not every document matters: identify those that affect the accounting treatment.
Part 1 · Classification · Analysis
Sort each document: does it affect the accounting treatment?
Drag each item into its category, or tap the category under the item.
Fixed asset record of the press
Technical report of 2 January 20X4
Financial controller's proposals
Insurance certificate
8 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.
Task 1Analysis
What is the nature of the revision of useful life and residual value? How is it applied?
Task 2Missing information
What information is missing to estimate the residual value, and what assumption do you make?
Task 3Calculation
Calculate the carrying amount of the press at 1 January 20X4.
Part 1 · Calculation
Calculate the carrying amount of the press at 1 January 20X4.
Task 4Calculation
Calculate the revised 20X4 charge and the effect of the change in estimate on the period.
Part 1 · Calculation
Calculate the revised 20X4 charge and the effect of the change in estimate on the period.
Result: Effect of the change on the 20X4 charge
Task 5Professional judgement
Assess the financial controller's four proposals, including the change in depreciation method.
Task 6Journal entries
What journal entry do you record for the 20X4 depreciation?
Part 1 · Journal entry · Journal entries
Entry 1 of 1
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Task 7Effects on the financial statements
What is the impact on the 20X4 financial statements, including the notes?
Part 1 · Calculation
What is the impact on the 20X4 financial statements, including the notes?
Part 2 · Classification · Analysis
State the direction of the effect on each financial statement aggregate.
Financial position (balance sheet)
Profit or loss
Other comprehensive income
Equity
Notes
Part 3 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Notes
Task 8Conclusion
Write the concluding memo to the financial controller.
Your working draft for this file: points noted, leads, intermediate calculations.
Saved on this device only; never graded.
Complete every item of the file to submit it (0 / 11).
Document this file
These working papers use the data and results of this case.
Normative references