Practice Part 1

Business Administration II
Subarea A:

Accounting
at the university of applied science Pforzheim

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Prof. Dr. Robert Nothhelfer

Practice 3.2 (General Accepted Accounting Principles)

How do you assess the following recognition and valuation approaches? If you judge the approaches as not
permitted, please name the GAAPs, which are not in line.
a)
b)

c)

d)

e)

f)

In the balance sheet position cash and cash equivalence are cash, postal check (Postscheck) and
positive bank deposits included.
The KASPAR AG is the owner of shares, which are recognized as current assets. Last year the market
values of some of the shares were falling under the acquisition price. During the same period the value
of other shares was raising over the acquisition costs. All speculation gains and losses together are
coming to zero, so that in the balance sheet the shares are valuated with the same value as last year.
The KASPAR AG purchased in the last year 10 trucks and because of the positive economic situation
the declining balance depreciation (20%) was chosen. This year the KASPAR AG aims to report a high
profit. Therefore the management decided to depreciate all old and new trucks linear over a useful life of
20 years.
The KASPAR AG owns land since a longer period of time, which is valued by the acquisition costs of
200.000,- . The market value of the land increased during the period of time ten times. The managers
decided to valuate the land at the market value because of the principle of accuracy.
The KASPAR AG expect from some customers claims for damages because of insufficient services. The
claims of the customers were only verbally communicated (so far). Therefore the management decided
according to the periodization principle to recognize the claims of the customer in the next reporting
period.
After preparing the opening balance for the next reporting period, the KASPAR AG recognized, that they
forgot some bookings in the closing balance. According to the true and fair view they correct the
opening balance.
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Prof. Dr. Robert Nothhelfer

Part 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 some
books 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 sold
until 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. This
equals 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 Immo
AG. 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?

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Prof. Dr. Robert Nothhelfer

Part 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 companys 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?

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Prof. Dr. Robert Nothhelfer

2.
2.2.3

Der handelsrechtliche Jahresabschluss

Bilanzbewertung: c) Herstellungskosten

Exercise Production Costs

A company produces a machine with the following costs:
Raw materials and purchased parts

100 T

Wages of workers in the production

Proportionate expenses for social security
Proportionate expenses for a child daycare center
Costs for concepts and special tools
Proportionate costs of production management
Costs for a marketing concept for the machine
Depreciation of used machines

300 T
100 T
10 T
100 T
70 T
50 T
80 T

With which amount will the machine be recognized at least / at the most
a) in the commercial balance sheet
b) in the tax balance sheet ?

Prof. Dr. Robert Nothhelfer

Part 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?

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Prof. Dr. Robert Nothhelfer

Practice 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 of
Profit
1. year
2. year
3. year
4. year

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Prof. Dr. Robert Nothhelfer

Practice 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?
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Prof. Dr. Robert Nothhelfer

Practice 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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Prof. Dr. Robert Nothhelfer

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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Prof. Dr. Robert Nothhelfer

Practice 6.2

(Valuation simplification)

The Rad GmbH produces bicycles for children. At the balance sheet date the company has
1.800 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 the
following information:
Initial value
Increase
Increase
Increase
Total decrease:

01.01.2006:
10.04.2006
15.09.2006
10.12.2006

1.400 pc. to 48
3.000 pc. to 45
2.500 pc. to 43
2.800 pc. to 46
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?

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Prof. Dr. Robert Nothhelfer

Presentation of subscribed capital - exercise

One of your friends has founded a limited liability company (GmbH) in January with
subscribed capital of 60 TEUR, of which half has been paid in. Preparing the
financial 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 balance
sheet look like then?

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Prof. Dr. Robert Nothhelfer

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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Prof. Dr. Robert Nothhelfer

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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Prof. Dr. Robert Nothhelfer

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
Maturity
Issuing price
Redemption rate
Interest rate

2 Mio.;
10 years
90 %;
100%
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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Prof. Dr. Robert Nothhelfer

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
Manufacturing overhead costs
Depreciations
Administrative overheads
Distribution overheads

14.000,-;
4.000, 2.000,-;
500, 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?
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Prof. Dr. Robert Nothhelfer

Exercise
The balance sheet of the Solvency AG at December 31st, 20X1 looks as follows (TEUR):
Debit
Land + Buildings
Office Equipment
Long-term loans
Inventories
Trade receivables
Cash / Cash equivalents
Total

180
30
70
50
40
30
400

Credit
Equity
Provisions
Long-term loans
Short-term loans
Trade payables

90
60
150
70
30
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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Prof. Dr. Robert Nothhelfer