Cases
Practical case
Transports Vélarde SA (fictitious entity) revises the useful life and residual value of its truck fleet at 1 January 20X5. You prepare the 20X5 charge and the note.
Your assignment
Qualify the revision, compute the carrying amount at 1 January 20X5 and the revised charge, post the entry, measure its effect, quantify the effect on 20X5 and future periods and 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.
Fundamental level: the method, help and references are shown.
Method
File checklist
4 documents: open each one to read it.
Document 1Table
Transports Vélarde SA (fictitious entity) operates twelve trucks bought on 1 January 20X2 for 1,440,000. Straight-line depreciation over 8 years, residual value initially estimated at 240,000, i.e. an annual charge of 150,000. Accumulated depreciation at 31 December 20X4: 450,000. No impairment.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Cost of the fleet | €1,440,000.00 | |
| Original residual value | €240,000.00 | |
| Original useful life | 8 years | |
| Accumulated depreciation at 31 December 20X4 | €450,000.00 | |
| Annual charge before revision | €150,000.00 | |
| New residual value | €150,000.00 | |
| Remaining life at 1 January 20X5 | 4 years | |
| Date of the change | January 1 20X5 |
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 register: truck fleet
Technical note from the fleet manager
Proposal from the management controller
Diesel price index
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
Is the revision of the useful life and the residual value a change in policy, a change in estimate or an error? What about the proposal in D3?
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
Compute the carrying amount of the fleet at the date of change.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Compute the carrying amount of the fleet at the date of change.
Task 3Calculation
Compute the revised annual charge.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Compute the revised annual charge.
Task 4Journal entries
Post the 20X5 charge.
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 5Effects on the financial statements
What is the effect of this entry on the 20X5 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
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Equity
Task 6Calculation
Quantify the effect of the change on 20X5 and on future periods, to be disclosed in the notes.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Quantify the effect of the change on 20X5 and on future periods, to be disclosed in the notes.
Result: Total expected effect on 20X6 to 20X8
Task 7Conclusion
Write the conclusion and the note on the change in estimate.
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 / 9).
Document this file
These working papers use the data and results of this case.
Normative references