Cases
Practical case
Gravelune Granulats SA (a fictitious entity) operates hard rock quarries. On 1 January 20X1, it brings into service a mobile crushing plant on the site of the Vaurieux quarry. You are preparing the financial statements for the year ended 31 December 20X1.
Your assignment
Analyse the restoration obligation arising from the installation, determine the best estimate of the expenditure taking future events into account, discount it and recognise the provision at 1 January 20X1; then calculate the unwinding of the discount for 20X1, revise the provision at the reporting date, prepare the movement schedule, record the entries for 20X1 and measure their impact.
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.
Intermediate level: help remains available, on demand.
Method
File checklist
Document 1
Document 1 · Document 4
Document 1
5 documents: open each one to read it.
Document 1Contract
Extract from the operating permit. Operation of the plant begins on 1 January 20X1 and ends on 31 December 20X3. The operator must (a) restore the temporary access track built to bring in the plant, by 31 December 20X1 at the latest; (b) dismantle the plant and rehabilitate the platform at the end of operation, on 31 December 20X3. The track and the platform were built in December 20X0, before the plant was brought into service.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Start of operation | January 1 20X1 | |
| Deadline for restoring the track | December 31 20X1 | |
| End of operation and dismantling date | December 31 20X3 | |
| Firm quote for restoring the track | €54,000.00 | |
| Dismantling cost with the current technique | €689,856.00 | |
| Cost reduction from experience with the existing technique | €60,000.00 | |
| Possible saving with the robotic process under test | €90,000.00 | |
| Expected proceeds from the sale of scrap metal | €35,000.00 | |
| Pre-tax discount rate | 8% | |
| Equivalent post-tax rate | 5.9% | |
| Payment for restoring the track | €54,000.00 | |
| Payment date | December 31 20X1 | |
| Balance of the provision account after closing entries | €540,000.00 | |
| Selling price per tonne | €18.50 | |
| Forecast volume for 20X2 (tonnes) | 420,000 units |
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 operating permit
Bureau Arcelin report
Treasury memo
Records for 20X1
Aggregates sales price list
10 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
Analyse the restoration obligation: obligating event, nature and date of recognition.
Task 2Analysis
Determine the best estimate of the expenditure taking future events into account.
Part 1 · Calculation
Determine the best estimate of the expenditure taking future events into account.
Task 3Calculation
Calculate the present value of each expenditure and the provision at 1 January 20X1.
Part 1 · Calculation
Calculate the present value of each expenditure and the provision at 1 January 20X1.
Result: Provision at 1 January 20X1
Task 4Journal entries
Record the entries recognising the provision at 1 January 20X1.
Part 1 · Journal entry · Journal entries
Entry 1 of 2
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Part 2 · Journal entry · Journal entries
Entry 2 of 2
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 5Calculation
Calculate the unwinding of the discount for 20X1.
Part 1 · Calculation
Calculate the unwinding of the discount for 20X1.
Task 6Calculation
Revise the provision at 31 December 20X1: is an additional provision or a reversal needed?
Part 1 · Calculation
Revise the provision at 31 December 20X1: is an additional provision or a reversal needed?
Result: Reversal on revision
Task 7Calculation
Prepare the movement schedule of the provision and reconcile it with the general ledger.
Part 1 · Calculation
Prepare the movement schedule of the provision and reconcile it with the general ledger.
Result: Difference with the general ledger
Task 8Journal entries
Record the unwinding and utilisation entries for 20X1.
Part 1 · Journal entry · Journal entries
Entry 1 of 2
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Part 2 · Journal entry · Journal entries
Entry 2 of 2
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 9Effects on the financial statements
What is the impact of the 20X1 entries 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 10Conclusion
Write the conclusion.
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 / 15).
Document this file
These working papers use the data and results of this case.
Normative references