Cases
Practical case
Verdane Immobilier SA (fictitious entity) acquires an office building for letting on 1 January 20X5. The seller grants deferred payment of 2 years, beyond normal credit terms. Fees, transfer taxes, start-up costs and initial operating losses are paid in cash.
Your assignment
Check the recognition criteria; compute the cash price equivalent of the price, the capitalisable costs and the initial cost; record the acquisition and the interest of the first year (case data); 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.
Intermediate level: help remains available, on demand.
Method
File checklist
4 documents: open each one to read it.
Document 1Contract
Sale contract of 1 January 20X5: agreed price of 2,205,000 EUR, payable on 31 December 20X6, that is 2 years of credit granted by the seller at the rate of 5% (credit rate observed in the market). According to the credit schedule, the interest expense of the first year is 100,000 EUR. Leases signed with good-quality tenants cover 90% of the floor area: the entity expects rentals.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Agreed price, payable in 2 years | €2,205,000.00 | |
| Rate of the seller's credit | 5% | |
| Number of credit periods | 2 years | |
| Interest expense of the first year (credit schedule) | €100,000.00 | |
| Costs incurred other than the price, paid in cash | €110,000.00 | |
| Start-up costs and initial losses | €30,000.00 | |
| Communication budget 20X6 | €15,000.00 |
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.
Sale contract
Costs paid in cash
Management note
Communication budget
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
Are the recognition criteria met and which items make up the initial cost?
Task 2Calculation
Compute the cash price equivalent of the deferred price.
Part 1 · Calculation
Compute the cash price equivalent of the deferred price.
Task 3Calculation
Compute the capitalisable costs.
Part 1 · Calculation
Compute the capitalisable costs.
Task 4Calculation
Compute the initial cost of the building.
Part 1 · Calculation
Compute the initial cost of the building.
Task 5Journal entries
Record the acquisition, the excluded costs and the interest of the first year.
Part 1 · Journal entry · Journal entries
Entry 1 of 4
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 4
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 3 · Journal entry · Journal entries
Entry 3 of 4
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 4 · Journal entry · Journal entries
Entry 4 of 4
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 their effect 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.
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 / 12).
Document this file
These working papers use the data and results of this case.
Normative references