Cases
Practical case
Cobalt Packaging SA (fictitious entity) had classified its machine M1 as held for sale at its carrying amount at 31 December 20X5. At 31 December 20X6, no acceptable offer having come, the board gives up the sale. The entity also examines two other assets: a line M2 stopped temporarily and a workshop M3 intended to be abandoned.
Your assignment
Qualify the three assets (ceasing the classification, temporary stop, abandonment); deal with the missing information and justify the change of plan; compute the depreciation not recognised, the adjusted carrying amount and the amount measured on ceasing the classification; record the return to use, the adjustment and any 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.
Advanced level: no help, the work is grouped by kind.
4 documents: open each one to read it.
Document 1Contract
Record of machine M1: cost of 600,000 EUR, nil residual value, depreciation period of 10 years, acquired on 1 January 20X1. Classified as held for sale on 31 December 20X5 at its carrying amount of 300,000 EUR (lower than fair value less costs to sell), with no depreciation in 20X6. Recoverable amount of M1 at 31 December 20X6: 225,000 EUR (case datum).
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Cost of M1 | €600,000.00 | |
| Residual value of M1 | €0.00 | |
| Depreciation period of M1 (in years) | 10 years | |
| Carrying amount of M1 in assets held for sale | €300,000.00 | |
| Recoverable amount of M1 at 31 December 20X6 | €225,000.00 | |
| Duration of the stop of M2 (in months) | 6 months | |
| Insurance premium of the offices | €5,400.00 |
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 machine M1
Board extract
Note on M2 and M3
Insurance invoice
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
How should M1, M2 and M3 be qualified: ceasing the classification, temporary stop or abandonment?
Task 2Missing information
What information is missing to date the end of the classification?
Task 3Professional judgement
Does the change of plan justify ceasing the classification of M1? Justify.
Task 4Calculation
Compute the depreciation not recognised during the classification.
Part 1 · Calculation
Compute the depreciation not recognised during the classification.
Task 5Calculation
Compute the adjusted carrying amount before classification.
Part 1 · Calculation
Compute the adjusted carrying amount before classification.
Task 6Calculation
Compute the amount measured on ceasing the classification.
Part 1 · Calculation
Compute the amount measured on ceasing the classification.
Result: Further loss beyond the missed depreciation
Task 7Journal entries
Record the return to use, the adjustment and any 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