FINAL PROJECT

Training program:
Master’s Degree in Digital Marketing & E-Commerce
Subject:
International Accounting
Send to: accounting@eneb.com

Last Name/Surname: Gadde Catherine

Name: Catherine Cresselda Gadde
ID/Passport: M9151644
Address: Salmiya
Region: Middle East
Country: Kuwait
Telephone: +965 55091708
E-mail: cnc_17@hotmail.com
Date: 05/08/2020

ENEB Business School

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 Final Project Guidelines

Please use this format to submit your final work. The paper must follow all the
guidelines as instructed in order to obtain full credit.

Remember that our team of tutors is available for any questions regarding your
final work. You must present the final version of your work as no previous
corrections will be carried out. To submit the final project, students must use
the template below, with their answers written after each statement.

Please present your final paper according to these requirements:

 Arial 12 Font.

 Margin: 2,5.

 Line spacing: 1,5.

 All fields on the cover page must be completed.

 The document needs to be properly paged.

Your final project must be authentic and individual. Any work that has been
plagiarized or papers written by others or with the help of others are likely to be
failed. If this occurs for the second time, you will not be permitted to obtain your
degree.

Be aware that you are permitted a maximum of two submissions per subject. If
both projects do not meet the standards and fail, the student must pay the
corresponding fee to be evaluated again.

When writing your final project please use Microsoft Office, Adobe or Apache's
Open Office Writer tools (DOC, DOCX, ODT, PDF, etc.). Please consult your
tutor when using a different format. Additional information about the software
will be needed.

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Please use the following format:

ddmmyyyy_Subject_LastNameandName.pdf

Example:

11052019_StrategicManagement_ElsaMoore.pdf

The project should not exceed more than 18 pages, excluding the cover page,
bibliography and the appendix.

Evaluation Guidelines

The final work will be evaluated based on the following criteria:

 Acquired knowledge (25%): the knowledge acquired throughout the

course of the subject will be evaluated through the analysis of the
theoretical data shown in the project presented by the student.

 Development of the Subject (25 %): the interpretation of the thesis

subject by the student and its development will be evaluated in a
coherent and analytical manner.

 Final result (25%): the final evaluation is based on coherent

solutions applied to solve objectives set out in the paper. The
presentation must be conclusive and formatting must meet
established parameters.

 Additional information and bibliography (25%): additional

information regarding the research and subject matter will be
evaluated and taken into consideration as a bonus. This consist of:
bibliography, visual graphics, charts, independent studies carried out
by the student, external academic sources, articles of opinion, etc. All

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 sources, both printed and online, must be referenced according
to the APA regulations.

BACKGROUND

We provide you with the balance sheet of a Spanish company at the end
of the year. The company carried out its accounting according to the
PGC 2007. You have to analyse each of the items and specify which
group of the Chart of Accounts they belong to and the specific coding
that corresponds to it according to the Chart of Accounts of the General
Accounting Plan to each entry.

Once all the accounts have been coded, create the closing entry for the
company.

  ASSETS       LIABILITIES    
       
Non-current assets   Net equity  
Intangible fixed assets:   Equity capital:  
Industrial Propriety 40.500 € Capital Social 3.000.000 €
Cumulative depreciation II -5.000 € Legal reserve 348.180 €
Tangible fixed assets:   Profit and Loss 158.810 €
Constructions 3.900.000 €    
ICT Equipment. 9.000 € Non-current liability  
Long-term
Furniture 70.000 € debts  
Transport 35.000 € Long-term debt to institutions. 710.000 €
Cumulative depreciation IM -122.000 €    
    Current liability  
Short-term
Current Asset   debts  
Stock:   Short-term debts to institutions. 38.000 €
Goods 62.000 € Suppliers 200.000 €
Impairment loses -1.150 € Creditors 3.560 €
Debtors:  
Clients 236.200 €  
Short-Term investments    
Short-term investments (shares) 9.000 €    
Liquidity:    
Banks   225.000 €        
4.458.55
TOTAL ASSETS 0 € TOTAL LIABILITIES 4.458.550 €

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 Description Category Code

Intangibles 203
Industrial Propriety
Accumulated
amortization of
280
Cumulative depreciation II intangible assets

211
Constructions
217
ICT Equipment..
Property, Plant &
Equiptment 216
Furniture
218
Transport
Accumulated
ASSETS

depreciation of
2811, 2817,
property, plant and
Cumulative depreciation IM 2816, 2818
equipment

Commercial
300
Goods Actions

Deterioration of 390
Impairment losses
commodity value

Unpaid
Commercial 4215
Clients
Effects

Short-Term
Short-term investments Financial Lease 524
(shares) Creditors

Treasury 574
Banks
LIABILITI

Share Capital 100

Capital Social
Legal Reserve 112
ES

Legal Reserve
Profit and Loss Common 651
Operating Result

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 Losses on
impairment of
Long-term debt to shares and 696
institutions. securities that
represent long-
term debt

Impairment losses
on shares and
securities that
Short-term debts to 698
institutions. represent short-
term debt

Providers 400
Suppliers
Trade Accounts
411
Creditors Payayble

The company's closing seat aims to demonstrate, at the end of each annual
financial year, the company's accounting result (loss and profit). All accounting
facts are found and recorded with the purpose of witnessing the current year
and analyzing better planning in the coming year. Taking into account this
description, the following calculation is considered for the company's closing
seat for the annual accounting year:
Working Capital = Non-Current Assets - (Equity - Non-Current Liabilities) =
3.927.500 € - (3.506.990€ - 710.000€) = -289.490€

1) Based on the International Accounting Standards, solve the following

exercises:

IAS 16. Fixed Assets. We are a graphic arts company, and at the beginning of
2016, we acquired a new printer. The price of this printer was 25,000 euros.
The additional expenses of the purchase were the following.:

- Installation and assembly: 3.000 euros.

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 - Transportation and delivery: 1.150 euros.

All operations carry a 21% VAT (not included), and the payment of the amounts
is made by bank check.

During January the assembly and installation of the new printer take place,
which is in perfect working condition from February 1st.

The useful vine of the printer is estimated at 10 years, and its amortisation will
be carried out following the linear method. Additionally, at the end of its useful
life, the company will have to face the costs of dismantling and rehabilitation of
the place. Estimating said costs in 5,000 euros. Besides, said machinery
requires specialised weekly maintenance, amounting to 250 euros per month.

Calculate:

- The initial cost of the acquisition.

- The amortization fees.
- The costs derived from daily maintenance.
1. Initial cost of the acquisition
“As per IAS 16.15, An item of property, plant and equipment should
initially be recorded at cost. Cost includes all costs necessary to bring the
asset to working condition for its intended use. This would include not
only its original purchase price but also costs of site preparation, delivery
and handling, installation, related professional fees for architects and
engineers, and the estimated cost of dismantling and removing the asset
and restoring the site.”
Source: https://www.iasplus.com/en/standards/ias/ias16
As per the Spanish General Accounting Plan, page 69, “Non-deductible
input VAT shall be included in the purchase price of current and non-
current assets and services that are subject to this tax”. Thus, the cost is
the purchase price + installation + transportation (all have to include the
21% VAT) + dismantling costs. You also need to specifically state the
assumption that the 5K costs is the likely amount in 10 years.
So ( 25k + 3k + 1.15 ) x 1.21 + 5k = 40.271,5
2. Cost of Amortization

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 “As per IAS 16.55, Depreciation begins when the asset is available for
use and continues until the asset is derecognised, even if it is idle
“Source: https://www.iasplus.com/en/standards/ias/ias16. As per the
above, the useful life is 10 years and it was available for use from Feb 1.
The amortization will be the total cost above divided by 10 and multiplied
by 11/12.
So ( 40.271,5 / 120 ) * 12 = 4.027,15
3. Maintenance
250 given for the month. To find the daily cost it has to be divided by the
number of days in the month. Assuming it is feb 2016, it comes to:
250 / 29 = 8,62

IAS 36. Impairment of assets. We are a photo studio, and due to the increase
in work and staff, we have had to acquire three new cameras and accessories.
The acquisition occurred in January 2018. The prices of the cameras are as
follows:

- Camera 1: 1.750 euros

- Camera 2: 3.500 euros
- Camera 3: 1.950 euros
- Accessories: 4.550 euros

Calculate:

- The impairment loss of the asset at the end of 2020, taking into account
that the recoverable amount of the acquisitions is:
o Camera 1: 575 euros
o Camera 2: 1.500 euros
o Camera 3: 750 euros
o Accessories: 2.200 euros
1. As per IAS 36, the impairment loss of an asset is the carrying value less
recoverable amount. Carrying amount is the amount of an asset less
accumulated depreciation and accumulated impairment losses Source:
https://www.iasplus.com/en/standards/ias/ias36.

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 As per page 157, the maximum useful life for tax in Spain for computer
hardware is used for the camera and accessories since cameras can
become obsolete due to the advancement of technology similar to
computer hardware. Source: https://www.ey.com/Publication/vwLUAssets/ey-
2018-worldwide-capital-and-fixed-assets-guide/$FILE/ey-2018-worldwide-
capital-and-fixed-assets-guide.pdf
Depreciation of camera and acc. = cost of each camera divided by 8
Cam1 = 218,75
Cam 2 = 437,5
Cam3 = 243,75
Acc. = 568,75
Since it is for 2018, 2019, 2020, multiply the above is multiplied by 3 to
determine the depreciation for 3 years
Cam 1 = 218.75 x 3 = 656.25
Cam 2 = 1312.5
Cam 3 = 731.25
Acc = 1706.25
Carrying value at the end of 2020 for each is the price at 2018 less the
depreciation for 3 years
Cam 1 = 1750 – 656,25 = 1.093,75
Cam 2 = 3500 – 1312,5 = 2.187,5
Cam3 = 1950 – 731,25 = 1.218,75
Acc = 4550 – 1706,25 = 2843,75
Completed the above, we conclude the impairment loss is equal to the
cost value at the end of 2020 calculated above, less the recoverable
amount given

IAS 38. Intangible Assets. On March 1, 2016, we obtained a patent for 7,500
euros.

At the close of the fiscal year, on December 31, 2016, the fair value of the
patent was 9,000 euros.

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As of December 31, 2017, the fair value of the patent stands at 8,000 euros.

The criterion we use for valuation after the initial recognition of the asset is the
revaluation model.

Formulate:

‒ Make the accounting entries corresponding to the acquisition of the asset

and at each accounting close.
Acquisition
Dr. Patent 7500
Cr. Cash (assuming it was paid using cash) or AR 7500
“As per IAS 38, under the revaluation model, revaluation increases are
recognised in other comprehensive income and accumulated in the "revaluation
surplus" within equity except to the extent that they reverse a revaluation
decrease previously recognised in profit and loss (...) the revaluation increase
goes to other comprehensive income except to the extent that it is reversing a
revaluation decrease previously recognized”. Source:
https://www.iasplus.com/en/standards/ias/ias38
Close of fiscal year 2016
Dr. Patent (9000 – 7500) 1500
Cr. OCI – Revaluation Surplus (9000 – 7500) 1500
The fair value increased so there is a gain, which as per the above is
recognized in OCI. If it was a loss, it would first be reversed up to the extent of
the OCI gain (in year 1 it would be $0) and the remaining would go to the
income statement. Now the value of your patent is 9k not 7.5k
Close of fiscal 2017
Dr. OCI – Revaluation Surplus (9000 – 8000) 1000
Cr. Patent (9000 – 8000) 1000
The current value of your patent is 8k. if the revalued amount in 2017 was 5000,
the entry would have been as follows
Dr. OCI – Revaluation Surplus 1500
Dr. Loss on revaluation of patent (income statement) 2500
Cr. Patent 4000

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As stated, the OCI is reversed in full and the loss that’s more than the 1500 is
recorded in the income statement. However, the loss was less than 1500 so the
entire reversal took place in OCI

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