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Exercise 1
The 2008 Balance Sheet of the Light Company is reported in the following table (expressed in
thousand euro).
Non current assets
23.500 Equity
Property, Plant and Equipment
14.000 Issued capital
Investment property
4.500 Share premium accounts
Intangible assets with indefinite useful life
- Revaluation Reserve
Intangible assets with definite useful life
5.000 Other reserves
Holdings
- Retained earnings
Other Financial activities
- Net Income/Loss
Current assets
35.000 Non current liabilities
Debt in issue
Receivables and others
6.000
Debt to bank
Inventories
3.000 Other non current financial liabilities
Risk and charges
Work in progress on ordination
Funds to personnel
Current Liabilities
Current financial activities
1.000
Debt in issue
Cash and cash equivalent
25.000 Debt to bank
Discontinued operations
5.000 Debt to suppliers
Other financial current liabilities
Tax debt
Other current liabilities
Liabilities related to discontinued
operations
TOTAL ASSETS
63.500 TOTAL LIABILITIES
31.000
20.000
1.500
1.000
3.000
1.500
4.000
18.000
12.000
2.500
3.500
14.500
10.000
4.250
250
63.500
By reading the Notes to the Financial Statement, we know that:
A)
B)
C)
D)
E)
F)
G)
H)
I)
The Share capital is composed by 400.000 ordinary shares;
The Light Company uses the fair value model;
Depreciation is calculated according to the linear model;
The item Property, Plant and Equipment refers to:
‒ Production plant bought at the beginning of January 2007 (01/01/2007) with a value of
12.000 k€ with a useful life of 6 years
‒ Storehouse with a residual useful life (2009 is included) equal to 5 years;
The item Intangible assets with definite useful life refers to a brand bought the 01/01/2006. It residual
useful life at the end of 2008 is 2 years;
The item Investment properties refers to some apartments bought by the company;
The Revaluation Reserve refers to the production plant that had been revaluated (1.000 k€) at the
end of 2008 (31/12/2008);
The item Debt to Bank in current liabilities refers to a debt of 10.000 k€, started at the beginning of
July (01/07/2008) and it will last 15 months. The interest rate is equal to 5% and borrowing costs will
be paid at the end of the debt. The related cost (accrual accounting principle) is accounted in the
item Other current financial liabilities.
The item Debt to Bank in non current liabilities have an annual interest rate of 10% and the related
payment is postponed every 4 months (30/04 of every year). The 20% of this debts will end in 2010.
J)
Discontinued operations refers to a plant that could not be used any more. The plant will be ceded
at the beginning of January 2009 and it is paid by cash (4.500k€);
K) The Light signed an agreement with the Cleaning For You (CFY) to receive cleaning services. The
agreement is signed at the beginning of September 2008 and it will last 2 years. The Cleaning For You
wants to receive in advance the annual payment of 1.800 k€. Cost related to 2009 (accrual accounting
principle) is accounted in the item Receivables and others.
L) The Light pays its suppliers every 3 months
M) Commercial receivables are collected every 4 months.
During 2009, the following events occurred:
1. Distribution of the 60% related to 2008 net income as dividends;
2. Sell of finished goods, realizing a revenue of 42.000 k€. The company is used to store the 5% of the
allowed credit;
3. Purchase of raw material for a total amount of 6.000 k€;
4. The company paid liquidation for a total amount of 1.500 k€;
5. Shareholders paid of 800 k€ related to a capital increase in 2008. The amount paid in 2008 is 600 k€;
6. At the beginning of January 2009, the company bought a plant (useful life of 5 years). The value of
the plant is 5.000 k€ and it has been paid by cash. To buy the plant, the company asked for a debt to
bank. The bank will last 3 years and it is equal to 2.400 k€. The debt will start the 01/03/2009. The
annual interest rate is equal to 10% and the borrowing costs are paid following the accrual accounting
principle;
7. Cost to personnel are equal to 5.000 k€ and the 30% of this amount is stored in Funds to personnel;
8. At the end of 2009, the company sold the storehouse for a total price of 3.500 k€. The buyer’s
company paid by cash the 80% of the price, while the remaining 20% will be paid in 2010;
9. The company receives the payment of 3.000 k€ for a service provided to another company. The 50%
of the payment is postponed in 2010;
10. Inventories of finished goods, at the end of the 2009, increase of a value equal to 1.500 k€, while that
of raw materials decrease of 500 k€.
We also know that:
a) The value of investment properties increases its value (500 k€):
b) The value of current financial assets decreases (250 k€);
c) A loss of value of 700 k€ for the item Intangible assets with indefinite useful life
Please account for the events and provide the Balance Sheet and the Income Statement of the 2009.
Exercise 2
The 2010 Star Balance Sheet is reported in the following table (expressed in thousand euro).
Non current assets
Property, Plant and Equipment
Investment property
Intangible assets with indefinite useful life
Intangible assets with definite useful life
Holdings
Other Financial activities
Current assets
47.500
34.000
1.500
12.000
43.000
Receivables and others
10.000
Inventories
3.000
Work in progress on ordination
-
Current financial activities
-
Cash and cash equivalent
Discontinued operations
TOTAL ASSETS
30.000
4.252
94.752
Equity
Issued capital
Share premium accounts
Revaluation Reserve
Other reserves
Retained earnings
Net Income/Loss
Non current liabilities
Debt in issue
Debt to bank
Other non current financial liabilities
Risk and charges
Funds to personnel
Current Liabilities
Debt in issue
Debt to bank
Debt to suppliers
Other current financial liabilities
Tax debt
Other current liabilities
Liabilities related to discontinued
operations
TOTAL LIABILITIES
57.000
40.000
2.500
2.000
4.500
3.000
5.000
17.500
10.000
2.500
5.000
20.252
12.600
7.400
252
0
94.752
By reading the Notes to the Financial Statement, we know that:
A) The Share capital is composed by 100.000 ordinary shares
B) The item Property, Plant and Equipment refers to:
‒ A production plant bought in January 2009 (01/01/2009) (value 24.000 k€, useful life 6 years)
‒ A storehouse with a residual useful life (at the end of the 2010) of 3 years
C) The item Intangible assets with definite useful life refers to a brand bought in January 2009
(01/01/2009) with useful life of 5 years
D) The Star Company uses the fair value model
E) Depreciation is calculated according to the linear model;
F) The revaluation Reserve is related to a previous revaluation of the storehouse
G) The item Current debt to bank refers to a debts started the 01/10/2010 that will last 12 months. The
payment of borrowing costs is post-poned at the end of the debt. The annual interest rate is 8%. Cost
related to 2010 is accounted in the item Other current financial liabilities
H) The item Non current debt to bank refers to a debts started in October 2008 (01/10/2008). Annual
interest rate is 10%. The payment of borrowing costs is post-poned. The payment of borrowing costs
is due every 4 months. The 50% of this debts will end during 2012.
I) Average time for suppliers’ payment is 2 months
J) The Star signed an agreement with the Moon Company to receive transport services. According to
the agreement, The Star must pay in advance of an annual fee (2.400 k€). Cost related to 2011 are
accounted in the item Receivable and others. The agreement will last 3 years and it was signed the
01/10/2010.
K) Average time to collect Commercial receivables was 2 months in 2010 and it becomes 3 months in
2011.
During the 2011, the Star Company:
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
Distributed the 40% of 2010 net income;
It ended a buy-back activity through which it bought back 30.000 shares at a price of 500 €/share
Purchase of raw material for a total amount of 7.500 k€;
Sell of finished goods, realizing a revenue of 42.000 k€. The company is used to store the 6% of the
allowed credit;
Collection of dividends from a controlled company for a total collection of 800 k€
Sell of the a production plant accounted in the item Discontinued operations generating a capital
gain of 500 k€;
Cost to personnel are equal to 9.000 k€ and the 30% of this amount is stored in Funds to personnel;
In December 2011 the company sold the storehouse at a price of 15.000 k€. The 60% of the price is
immediately collected, while the remaining part will be paid in 2012
It paid the consultancy service to the Cask company (2.500 k€). The 40% of the payment is postponed in 2012
Total taxes are equal to 3.000 k€. 1.000 k€ are paid in 2011 and the remaining part will be paid in
2012
Inventories of finished goods, at the end of the 2009, increase of a value equal to 1.000 k€, while
that of raw materials decrease of 500 k€.
We also know that:
i)
ii)
The impairment test (at the beginning of the 2011) on the production plant identifies a loss of
value equal to 400 k€
i) The impairment test (at the end of the 2011) on the Item Intangible assets with indefinite
useful life identifies a loss of value equal to 500 k€
Please account for the events and provide the 2011 Balance Sheet and Income Statement.