Cases
Practical case
Mecanova SA (fictitious entity, food-processing business) closes its books on 31 December 20X5. On that day, the board classifies its packing line as held for sale: the criteria are met (case data). The 20X5 depreciation charge has not yet been recorded.
Your assignment
Compute the last depreciation charge and the carrying amount at the classification date; add up the costs to sell and compute fair value less those costs; determine the amount measured and the loss; record the depreciation, the reclassification and the loss (case data); present the effect 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.
Intermediate level: help remains available, on demand.
Method
File checklist
4 documents: open each one to read it.
Document 1Contract
Fixed asset record of the packing line: cost of 600,000 EUR, nil residual value, depreciated on a straight-line basis over 10 years since 1 January 20X1; accumulated depreciation of 240,000 EUR at 31 December 20X4, the last charge having been recorded at that date. No previous impairment loss.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Cost of the line | €600,000.00 | |
| Residual value of the line | €0.00 | |
| Depreciation period of the line (in years) | 10 years | |
| Accumulated depreciation at 31 December 20X4 | €240,000.00 | |
| Fair value of the line | €285,000.00 | |
| Broker's commission | €6,000.00 | |
| Legal fees of the sale | €3,000.00 | |
| Transport to the buyer | €6,000.00 | |
| Interest on the loan financing the line | €8,000.00 | |
| Relocation costs 20X6 | €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.
Record of the packing line
Minutes of the board
Appraisal and costs to sell
Relocation costs
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
Why must a last depreciation charge be recorded before the classification, and none afterwards?
Task 2Calculation
Compute the last depreciation charge and the carrying amount at the classification date.
Part 1 · Calculation
Compute the last depreciation charge and the carrying amount at the classification date.
Result: Carrying amount at the classification date
Task 3Calculation
Add up the costs to sell.
Part 1 · Calculation
Add up the costs to sell.
Task 4Calculation
Compute fair value less costs to sell.
Part 1 · Calculation
Compute fair value less costs to sell.
Task 5Calculation
Determine the amount measured (lower of the two bases).
Part 1 · Calculation
Determine the amount measured (lower of the two bases).
Task 6Calculation
Compute the impairment loss.
Part 1 · Calculation
Compute the impairment loss.
Task 7Journal entries
Record the depreciation, the reclassification and the loss.
Part 1 · Journal entry · Journal entries
Entry 1 of 3
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 3
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 3
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 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 9Conclusion
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 / 13).
Document this file
These working papers use the data and results of this case.
Normative references