Cases
Practical case
Hydrozane Distribution SA (fictitious entity) distributes water and closes its books on 31 December 20X6. The Republic of Valdoria controls the entity, as it controls Valdoria Rail SA, one of its customers. The entity granted a loan to its chief executive, Mr Aldric Verne, and pays customs duties to the administration of a third country. Management must decide what to disclose about its relationships with the State.
Your assignment
Determine whether the exemption applies and to which entities; check its limits (natural persons, ordinary dealings); compute the transactions of the State group from the proportion given; assess the extent of the disclosure to keep; record the contract with Valdoria Rail SA; present the effect on the financial statements; conclude.
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.
5 documents: open each one to read it.
Document 1Minutes
Relationship with the State: the Republic of Valdoria controls the entity (case data, established by the facts: appointment of directors and power to set the financial policy) and also controls Valdoria Rail SA. No other entity controls the entity.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Contract with Valdoria Rail SA | €500,000.00 | |
| Sales excluding that contract | €1,900,000.00 | |
| Proportion made with the State and its entities (in %) | 40% | |
| Balance of the loan to the chief executive | €80,000.00 | |
| Customs duties paid in 20X6 | €36,000.00 | |
| Insurance premium 20X6 | €2,400.00 |
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.
Relationship with the State
Sales of 20X6
Loan to the chief executive
Customs duties paid
Insurance premium
7 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
Does the exemption apply and to which entities?
Task 2Analysis
Which relationships are not covered by the exemption or are not related parties?
Task 3Calculation
Compute the sales made with the State and its entities from the proportion given.
Part 1 · Calculation
Compute the sales made with the State and its entities from the proportion given.
Task 4Professional judgement
Which disclosure to keep: individual or collective? Justify.
Task 5Journal entries
Record the contract with Valdoria Rail SA (illustrative entry).
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 6Effects on the financial statements
What is the effect of the entry on the financial statements?
Part 1 · Classification · Analysis
State the direction of the effect on each financial statement aggregate.
Financial position (balance sheet)
Profit or loss
Other comprehensive income
Equity
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Equity
Task 7Conclusion
Write the conclusion: disclosure to provide.
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 / 9).
Document this file
These working papers use the data and results of this case.
Normative references