Accounting Practice_lecture - Copy (6) - Copy

Practice Part 1

Business Administration II

Subarea A:

Accounting

at the university of applied science Pforzheim

Prof. Dr. Robert Nothhelfer

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2Practice 3.2 (General Accepted Accounting Principles)How do you assess the following recognition and valuation approaches? If you judge the approaches as notpermitted, please name the GAAPs, which are not in line.

a) In the balance sheet position cash and cash equivalence are cash, postal check (Postscheck) andpositive bank deposits included.

b) The KASPAR AG is the owner of shares, which are recognized as current assets. Last year the marketvalues of some of the shares were falling under the acquisition price. During the same period the valueof other shares was raising over the acquisition costs. All speculation gains and losses together arecoming to zero, so that in the balance sheet the shares are valuated with the same value as last year.

c) The KASPAR AG purchased in the last year 10 trucks and because of the positive economic situationthe declining balance depreciation (20%) was chosen. This year the KASPAR AG aims to report a highprofit. Therefore the management decided to depreciate all old and new trucks linear over a useful life of20 years.

d) The KASPAR AG owns land since a longer period of time, which is valued by the acquisition costs of200.000,- . The market value of the land increased during the period of time ten times. The managersdecided to valuate the land at the market value because of the principle of accuracy.

e) The KASPAR AG expect from some customers claims for damages because of insufficient services. Theclaims of the customers were only verbally communicated (so far). Therefore the management decidedaccording to the periodization principle to recognize the claims of the customer in the next reportingperiod.

f) After preparing the opening balance for the next reporting period, the KASPAR AG recognized, that theyforgot some bookings in the closing balance. According to the true and fair view they correct theopening balance.


3Part 4.1 General recognition and measurement rules(Recognition/personal assignment )

a) Karl Chaos owns a small shop in Frankfurt. To extent his sortiment, he purchases somebooks in October 2013. Because of his tax advances the cash of Karl is limited. Therefore he likes to pay the received books in January 2014 (after the christmas business). The supplier Hugo Reibach does not trust Karl Chaos, because of the unsecure financial situation. Therefore he holds a retention of title until the payment of the books. Chaos solduntil the 31st of Dez. 2013 only 10 books. How do you judge the recognition of the books according to German commercial law?

b) The Immo AG is planning a Sale-and-lease-back transaction with the building used as headquarters, because of the bad economic situation. The company sold the building for 2 Mio. to a leasing company and leases for the duration of 20 years the building. Thisequals the ordinary economic life of the building. The contract includes no cancelation possibility for the leasing company. Damages on the building should be paid by the ImmoAG. How this transaction will be accounted in the BS of the Immo AG?

c) A commission agent should sell 50 office tables on behalf of a trading company. At the balance sheet date the commission agent still has got the tables in his inventory. Does the commission agent has to recognize the tables?


4Part 4.2 (Recognition/measurement regulation)

a) The yellow machine trader Peter Happy holds to the building company Good build a very good business relation over years. Peter Happy granted the building company every year boni payments in relation to the turnover. For the current business year the Good build company also expects a bonus. Should the building company account for? If yes, in which balance sheet position? Should Peter Happy account for this? Please explain your answer in detail.

b) On Dec. 27th, 20X1, the Swimming GmbH purchases from the Import AG 100 swimsuits for a total amount of 2,000 on credit, payable at 10th of January 20x2.

b1) How will this transaction be accounted for in the balance sheet of the Swimming GmbH be accounted for, if the swimsuits are still in the com-panys warehouse at the balance sheet date? Show the relevant GAAPs.

b2) How should the swimsuits be accounted if they are sold completely by the Swimming GmbH to the New Year swimmer Association for an amount of 2400 at the day of delivery and are delivered at that date?

b3) How will the financial statements be effected, if the suits are delivered and paid in the next year and sales prices for these models are fallen to 15 per piece?


2. Der handelsrechtliche Jahresabschluss2.2.3 Bilanzbewertung: c) Herstellungskosten

Exercise Production CostsA company produces a machine with the following costs: Raw materials and purchased parts 100 T Wages of workers in the production 300 T Proportionate expenses for social security 100 T Proportionate expenses for a child daycare center 10 T Costs for concepts and special tools 100 T Proportionate costs of production management 70 T Costs for a marketing concept for the machine 50 T Depreciation of used machines 80 TWith which amount will the machine be recognized at least / at the most

a) in the commercial balance sheetb) in the tax balance sheet ?

Prof. Dr. Robert Nothhelfer 5

6Part 4.3 (Valuation, acquisition costs)The KASPAR AG acquired a truck against cash in January 20x1. The list price was 150.000, - at this point of time. The retailer granted a discount of 20% off the list price. The KASPAR AG paid the invoice amount within a week with a discount of 3%. Furthermore, the following costs were incurred:

Transfer and registration 1.000, -Gas 100, -Subsequently built in fuel tank extension 1.200, -

The useful life of the truck is estimated at 10 years. It is not expected that there is any significant residual value. The depreciation method used should be both commercial code and tax law permitted. With which amount the truck should be accounted at the 31st of Dez. 20x1?

Prof. Dr. Robert Nothhelfer 6

7Practice 5.1 (Recognition and measurement)A company has developed a new production technique. The development costs are 100.000 and are included as expenses in the income statement. This production technique was registered as patent and approved. The company likes to use the production technic by themselves.

a) How could this transaction be accounted for?

b) How will the profit at closing date be influenced by recognition (and amortization).Assume a useful life of 4 years and a linear / straight line amortization. Please put the values in table below:

Change ofProfit

1. year2. year3. year4. year


8Practice 5.4 (Measurement, patent) In the research department of the Genius GmbH two patents were developed and used in the production process. Because this department only worked on these two patents it is proposed to recognize the patents in the balance sheet. The Controlling department showed 60.000,-for personnel expenses, 10.000,- for material and energy, and 15.000,- for general administration expenses. The Looser AG is interested in also using these patents. They provide a one-time payment of 100.000,-.

How are the costs of the patents in the balance sheet and income statement to be considered?

Practice 5.5 (Balance sheet, Establishment of the company)On 1st April 2011 the Bundy AG is founded. The following charges apply:

Which of the positions could, have to or could not be considered in the balance sheet of the Bundy AG?


9Practice 5.5 (Goodwill)The Mickey Mouse AG was acquired on the 1st of Jan. 20x1 by the Dagobert Duck AG at a price of 35.000.000,-. The closing balance sheet of Mickey Mouse AG at 31st of Dez. 20x0 contained the following items:

Land 5.000.000,- Machinery 10.000.000,- Inventories 1 5.000.000,- Cash 20.000.000,- Debt 30.000.000,- Share capital and reserves 20.000.000,-

Hidden reserves were included in land (3.000.000,-) and in machines ( 4.000.000,-). The debt was valued at the lower limit. The auditor estimates that there are hidden burdens in the amount of 2.000.000,-. The Mickey Mouse AG was acquired in an asset deal, the individual assets and liabilities have been included in the balance sheet of Dagobert Duck AG.

a. What is the value of the acquired goodwill?b. Please create the balance sheet of the new Maus/Duck AG if the Dagobert Duck AG has at the time of acquisition 10.000.000,- inventories, 40.000.000,- bank and 35.000.000,- debt.


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Practice 6.1(Recognition and measurement of non-current and current assets)The Quarzsand AG owns the following listed shares. The acquisition costs and market values of the shares are also listed below:

The future market development of the shares was predictable at the 31.12.20x0.

a) How should/could the shares be valued on Decemer 31st, 20X0 and on June 30th, 20X1?

b) Is the distinction between current and non-current assets relevant?

c) Will the result of a) be changed, if a tax balance should be created?


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Practice 6.2 (Valuation simplification)The Rad GmbH produces bicycles for children. At the balance sheet date the company has1.800 parts on stock, which are from different purchases in the business year. It is not possible to allocate the different parts to the individual purchases. The book keeping shows thefollowing information:

Initial value 01.01.2006: 1.400 pc. to 48Increase 10.04.2006 3.000 pc. to 45Increase 15.09.2006 2.500 pc. to 43Increase 10.12.2006 2.800 pc. to 46Total decrease: 7.900 pc.

a) What is the balance sheet amount, if the weighted periodic average is used?

b) Which other calculation methods are allowed under the german commercial code? Calculate the book values according to those. Which calculation method would you choose, if you want to show a profit as high as possible?

c) Which valuation methods are allowed according to the tax law?


Presentation of subscribed capital - exercise

One of your friends has founded a limited liability company (GmbH) in January withsubscribed capital of 60 TEUR, of which half has been paid in. Preparing thefinancial statements he seems a bit helpless and asks for your advice, how he should account for the equity.

Variant:The company claimed additional 10 TEUR to be paid in. What does the balancesheet look like then?

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Practice 7.5 (Accounting of equity)

In Dezember 20x5 the Baustein AG was founded. The subscribed capital of the

company is 100.000 and is split in 100.000 shares with a nominal value of 1. In

the statutory it is defined that 5% of the profit have to be allocated to the reserve

every year. The issue price of the shares will be 105%. Furthermore in the

shareholder contract it is defined that only 80% of the capital contribution should

be immediately paid in cash and the rest until the request of the board. In the year

20x6 the Baustein AG has a profit of 100.000. At yearend 50% of the not paid in

capital contribution is requested. The amounts due were paid in January 20X7.

a. Show the opening balance at the Dec 31st, 20x5 and explain the equity

positions.

b. Provide the balance sheet of the Baustein AG for the year 20x6 after profit

distribution assuming that the highest amount possible was decided to be

distributed to the shareholders.


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Practice 8.1 (Deferred items)

Please name the balance sheet positions at the 31.12.20x1 of the following

transactions:

Advanced payments (paid) for rental for the year 20x2 of 12.000,-.

Received advanced payment of 34.000,- for a delivery in 20x2.

An amount of 25.000,- has to be paid regarding delivered raw material

supplies.

Lending of a loan about a nominal amount of 100.000,- which was paid out by

90 %.

Received lease payments of 300 for the first quarter 20x2.

The rent for the storage building used last year was not paid until now (15.000

EUR). At the 30.11.20x1 the company no longer used this storage building.


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Practice 9.1 (Liabilities)

The credit AG issued a bond in the capital market which is used to finance a new

production line in business year 20x0. The bond has the following features:

Total nominal amount 2 Mio.;

Maturity 10 years

Issuing price 90 %;

Redemption rate 100%

Interest rate 8 %

How could the credit AG treat this transaction in the balance sheet as of

31.12.20x0 and of the following business years?


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Practice 9.2 (Provisions)

Carlo Manschetti provides high quality gold and silver jewelry for the German

aristocracy. From the house of Guldenburg a necklace was ordered. The agreed

purchase price amounts 50.000. As direct costs are expected 20,000 for

manufacturing and 20,000 for material.

The pro rata overheads costs are probably:

Material overhead costs 14.000,-;

Manufacturing overhead costs 4.000,-

Depreciations 2.000,-;

Administrative overheads 500,-

Distribution overheads 1.000,-

At the balance sheet date Manschetti has just started with the production of the

Necklace. Can or must Carlo Manschetti recognize for this pending transaction, a

provision in the commercial and tax balance sheet? What kind of provision would

be relevant here?


Exercise

The balance sheet of the Solvency AG at December 31st, 20X1 looks as follows (TEUR):

Debit Credit

Land + Buildings 180 Equity 90

Office Equipment 30 Provisions 60

Long-term loans 70 Long-term loans 150

Inventories 50 Short-term loans 70

Trade receivables 40 Trade payables 30

Cash / Cash equivalents 30

Total 400 400

In the previous year, equity amounted to 80 and total assets to 450.

Sales revenue 800, interest expenses 50, net result 30

(Previous year: sales revenue 750, interest expenses, 60, net result 30)

a) Calculate ROE, ROA and ROS for both years!

b) Calculate ROI and split it according to the Dupont scheme (only first level)!

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Accounting Practice_lecture - Copy (6) - Copy