2nd year Financial Accounting 2 - Seminar 7

Financial assets
Application 1 – subsidiary: share acquisition, dividends and sale of shares

Record the following transactions for Solaris PLC:

1. 10.01.2020 purchase of 20.000 shares issued by Mercury PLC, price 10 lei/share. The issued share represents 80% of
the voting rights in Mercury’s shared capital. For settlement 150.000 lei, are paid by bank transfer. The rest of it being
paid within 30 days
2. The brokers’ commission of 1% is paid by bank transfer.
3. 01.02.2020 The remaining amount is paid to Mercury PLC, by bank transfer.
4. 20.06.2020 Solaris cashes dividends from Mercury in amount of 55.000 lei.
5. 25.05.2021 the company receives 4.000 shares (at fair value 10 lei/share) due to increase in Mercury’s shared capital
with the retained earnings) (Previous years’ profit is used to increase the shared capital)
6. 30.09.2021 the company sells 6.000 shares for 12 lei/share. (2 steps 1 +Revenue and 2 +Exp = -Assets)
7. 30.09.2021 the sold shares are removed from the books (FIFO).
8. 15.10.2021 Receivable settlement by bank transfer.

GENERAL JOURNAL
ACCOUNTS
No Date Description AMOUNT
DEBIT CREDIT
1 10.01.20 Purchase of shares (20.000sh x 10)
Amount paid:
Remaining amount:
2 10.01.20 Commission payment (200.000 x 0,01)
3 09.02.20 Settlement of remaining amount
4 20.06.20 Cashing dividends
5 25.05.21 Receiving 4.000 shares (no cash transfer)
6 30.09.21 Sale of share (6.000 x 12)
7 30.09.21 Removal from the books (10,1 lei x 6.000sh)
8 15.10.21 Receivable settlement

Accounts to be used
261 Shares in affiliated entities A (subsidiaries)
2691 Amounts payable for investments in aff.entit. L
461 “Sundry debtors (receivables)” A
5121 “Cash at bank” A
6641 Losses on disposal of long term financial investments
7641 Revenues on disposal of long term financial investments
7612 Revenues from shares on associated entities
768 Other financial revenues.

D 261 “Shares in affiliates” C Please note:

The shares received for the increase of the share capital of the issuer with profit
(current profit or retained earnings) are recorded also as revenues (768 „Other
financial revenues”).

The shares received for the increase of the share capital of the issuer with other
equity components like premiums or reserves are recorded as 106 Reserves. The
value will be recorded as a revenue when the shares are removed from the
books

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2nd year Financial Accounting 2 - Seminar 7

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2nd year Financial Accounting 2 - Seminar 7

Application 2 – Shares in a new company

On 20.07.2018 Toptex PLC becomes shareholder of a new company Nova PLC. For this Toplex will bring a contribution in kind
of a car with a book value of 24.000 lei. (Entry value 96.000 lei, Depreciation 72.000 lei). Toplex receives 3.000 shares worth
30.000 lei. The shares give Toplex 30% of the voting rights of Nova PLC.
On 15.05.2019 the General Assembly of Shareholders decides to reinvest the 2018 year’s profit of 40.000 lei ( x 30% =Toplex).
On 20.05.2020 Toplex receives 1.200 shares evaluated at 10 lei/share fair value, based on the company’s decision to increase
the shared capital by including it’s existing reserves.
On 30.10.2020 Toplex decides to sell 4.000 shares, for 11 lei/share. Receivable settlement in 30 days.
As Toplex loses the >20% voting rights the remaining shares are transferred to other financial assets.

ACCOUNTS
No Date Description AMOUNT
DEBIT CREDIT
1 20.07.18 Receiving shares from Nova PLC. for contr in kind
Decrease in depr

Carrying amount of the car given

2 20.07.18 Receiving shares from Nova PLC

(Dif.between carrying amount and share value)
3 20.05.20 Receiving shares after capital increase (1.200 x
10)
4 30.10.20 Sale of shares (4.000 x 11)
5 30.10.20 Removal from the books (4.000 x 10)
6 30.10.20 Tranfer of shares (200sha)
7 30.11.20 Receivable settlement

Accounts to be used
1068 Other reserves L
2133 Motor vehicles A
2813 Depreciation of motor vehicles L
262 Shares in associates A (>20%, < 50%)
265 Other long term investments A (<20%)
2691 Amounts payable for investments in aff.entit. L
461 “Sundry debtors (receivables)” A
5121 “Cash at bank” A
6641 Losses on disposal of long term financial investments
7641 Revenues on disposal of long term financial investments
7612 Revenues from shares on associated entities
768 Other financial revenues.

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2nd year Financial Accounting 2 - Seminar 7

Application 3 – Other investments - depreciation

Record the following transactions for Invest PLC
1. 20.07.2019 purchase of 1.000 shares (listed on a stock exchange) of Vega PLC for 20 lei/share with the intention to
receive dividends (long term investment).
2. At the end of 2019 the current market quotation for Vega shares is 18 lei/share.
3. 23.06.2020 Invest sells 200 of Vega shares for 17 lei/share.
4. At the end of 2020 the current quotation is 17,5 lei/share
5. At the end of 2021 the current quotation is 21 lei/share

ACCOUNTS
No Date Description AMOUNT
DEBIT CREDIT
1 20.07.19 Purchase of share 1.000 x 20lei/sh
2 Dec 19 Impair loss (20-18) x 1.000 shares
3.1 23.06.20 Sale of 200 sh x 17 = 3.400
3.2 23.06.20 Removal at cost (200sh x 20/sh)
3.3 23.06.20 Revert impairment (200sh x 2)
4 Dec 2020 Increase impairm (18-17,5) x 800 sh
5 Dec 2021 Revert impairment (800sh x 2,5)

Year 2019
D 265 „Other LT investment” A C D 2963 „Imp.of other LT invest” L C

A BS Eq
Other Invest ______
EV
-Impair

Year 2020
D 265 „Other LT investment” A C D 2963 „Imp.of other LT invest” L C
EV Impair.

A BS Eq
Other Invest ____________
EV
-Impair

Year 2021
D 265 „Other LT investment” A C D 2963 „Imp.of other LT invest” L C
EV Impair.

A BS Eq
Other Invest _
EV
-Impair

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2nd year Financial Accounting 2 - Seminar 7

Application 4 – Other investments – Fair Value

Record the following transactions for Invest PLC
1. 20.07.2019 purchase of 1.000 shares (listed on a stock exchange) of Vega PLC for 20 lei/share with the intention to
receive dividends (long term investment).
2. At the end of 2019 the current market quotation for Vega shares is 18 lei/share.
3. 23.06.2020 Invest sells 200 of Vega shares for 17 lei/share.
4. At the end of 2020 the current quotation is 17,5 lei/share => Exp/Loss eval at FV = (18-17,5) x 800 shares
5. At the end of 2021 the current quotation is 21 lei/share => Rev/Gain eval at FV = (21 – 17,5) x 800 shares = 2.800

ACCOUNTS
No Date Description AMOUNT
DEBIT CREDIT
1 20.07.19 Purchase of share 1.000 x 20lei/sh
2 Dec 19 Eval at FV EOY 2017 (20-18)x 1K shares
3.1 23.06.20 Sale of 200 sh x 17 = 3.400
3.2 23.06.20 Removal (200 x 18)
4 Dec 2020 Loss/Exp with eval at FV EOY 2018
5 Dec 2021 Gain/Rev from eval at FV EOY 2019

Year 2019
D 265 „Other LT investment” A C Ex IS 2019 Rev

A BS Eq
Other Invest (FV)

Year 2020
D 265 „Other LT investment” A C Ex IS 2020 Rev

A BS Eq
Other Invest (FV)

Year 2021
D 265 „Other LT investment” A C Ex IS 2021 Rev

A BS Eq
Other Invest (FV)

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