Cases
Practical case
Plasturgie Delorme (a fictitious company) manufactures technical plastic parts and closes its accounts on 31 December. It applies the cost model to its property, plant and equipment. Its P450 injection press, acquired on 1 January 20X1, is depreciated on a straight-line basis over 10 years with no residual value. You are preparing the 20X4 year-end.
Your assignment
Using the documents provided, determine whether the press must be tested, calculate its recoverable amount and any impairment loss, record it and determine the depreciation charge for 20X5. One document is not useful.
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.
Fundamental level: the method, help and references are shown.
Method
File checklist
5 documents: open each one to read it.
Document 1Table
Extract from the fixed asset register at 31 December 20X4, P450 press: cost 900,000; accumulated depreciation 360,000; remaining useful life confirmed by the engineering department: 6 years; nil residual value.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Reporting date | December 31 20X4 | |
| Cost of the press | €900,000.00 | |
| Accumulated depreciation at 31 December 20X4 | €360,000.00 | |
| Remaining useful life | 6 years | |
| Residual value | €0.00 | |
| Share of output for the lost customer | 60% | |
| Shortfall of actual cash flows against budget | 35% | |
| Fair value of the press | €430,000.00 | |
| Dismantling and removal cost | €12,000.00 | |
| Legal fees for the sale | €3,000.00 | |
| Operator's termination benefit | €20,000.00 | |
| Value in use of the press | €480,000.00 | |
| 20X5 insurance premium | €4,500.00 |
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.
Extract from the fixed asset register
Management control memo
Dealer's offer
Value in use calculation
Insurance endorsement
9 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
Is there an indication of impairment at 31 December 20X4? What must you do?
Set out the facts, the question raised, then your analysis.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Task 2Calculation
Calculate the fair value less costs of disposal of the press.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Calculate the fair value less costs of disposal of the press.
Task 3Calculation
Determine the recoverable amount of the press.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Determine the recoverable amount of the press.
Task 4Calculation
Calculate the carrying amount of the press and the impairment loss at 31 December 20X4.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Calculate the carrying amount of the press and the impairment loss at 31 December 20X4.
Result: Impairment loss
Task 5Calculation
Calculate the depreciation charge for 20X5.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Calculate the depreciation charge for 20X5.
Task 6Journal entries
Which entry do you record at 31 December 20X4?
Identify the accounts affected and the direction of each movement; check the balance.
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 7Journal entries
Which depreciation entry will you record in 20X5?
Identify the accounts affected and the direction of each movement; check the balance.
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 8Effects on the financial statements
What is the impact of the 20X4 entry on the financial statements?
For each financial statement, state the line affected, the direction and the amount.
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
Notes
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Equity
Task 9Conclusion
Write the conclusion.
Write a conclusion that cites the facts and the treatment chosen.
This answer is not marked automatically: after submitting, you will compare it with the solution.
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