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11.4. Final Exam Review
11.4. Final Exam Review
Please register all the journal entries from January 1st of 2022 to December 31 of 2025.
2. PROVISIONS
The Company DDD, S.A. develops and sells a machine to cut the wood to produce
furniture. These machines are inserted in the production line of big furniture makers.
The client “Muebles de Primera, S.A.”, acquired this machine to cut the wood, but this
machine had some failures and caused considerable economic damage to the client.
Both Company DDD and the client tried to reach an agreement in order to solve this
situation, but it was impossible to agree on some points and finally the client decided
to sue Company DDD. Company DDD S.A. contacted its lawyer in order to find out the
probability to lose the lawsuit. The lawyer considers that the probability to lose the
lawsuit is 80%. Furthermore, the lawyer estimated that Company DDD may pay
1.000.000 euros to “Muebles de Primera, S.A.” in case they lose the lawsuit. It seems
that the judge is going to issue the final decision in 3 years-time, December 31, 2025.
Taking into account that the estimations have been calculated on December 31, 2022,
please:
A. Register all the operations (from January 1, 2022 to December 31, 2025)
that Company DDD, S.A. needs to register considering that the interest rate
is 4% on a year basis and in the final decision the judge says that Company
DDD should pay to its client 900.000 euros.
3. GRANTS
The company CCC, S.A. has acquired an electric motor vehicle amounting to 25.000
euros on January 1st of 2022. The Basque Government is giving grants for this kind of
acquisitions and after submitting the grant request before purchasing the asset the
Company received on January 1st of 2022 the written communication of the formal
concession. The grants is financing the 75% of the acquisition price. The useful life of
the motor vehicle is 5 years. At year end, the Company has identified impairment
indicators in the asset. It has realized several estimations and calculates that the
recoverable value of the asset amounts to 15.000 euros. Finally, on 1 st of May of 2023
the Company has sold the asset for 22.000 euros.
Furthermore, on January 1st of 2022, the Company acquired solar panels in order to
produce energy for self-consumption. The investment in these assets amounts to
100.000 euros and the useful life is 10 years. The Company has submitted the grant
request to finance the 50% of the panels. Due to the COVID-19 pandemic and the
number of the submitted projects, the Company has received the communication of
the concession on July 1st of 2022 and the company received the bank transfer on
December 1st of 2022.
4. INTANGIBLE ASSETS
The Company ABC, S.A. which competes in the sustainable automotive sector, has
been developing new projects about energy storage to use in cars. The company has
had the following expenses in the different phases of Research and Development.
The Company makes some calculations about the expenses made in order to evaluate
the capitalisation of assets at the end of December (31 st of December of each year).
The development phase finishes on December 31 st of 2021. The Company uses the
useful lifes shown in the General Accounting Plan.
After two years, that is, On December 31 st of 2023, the Company decides to register
the knowledge obtained as Industrial property in order to take advantage of it in the
future. The registration costs amounts to 20.000 euros and the useful life of the
industrial property is 10 years.