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UNIVERSITA’ COMMERCIALE “L. BOCCONI” – MILANO

ACCOUNTING DEPARTMENT

A.Y. 2018/2019

ACCOUNTING AND FINANCIAL STATEMENTS ANALYSIS – Module 2 - 30427

TIME: 60 MINUTES

Please remember the following rules:

• You are allowed to use the correction fluid.

• You are NOT allowed to hold mobile phones with you during the exam.
• If you make any mistake, you are allowed to erase the wrong answer and write the solution
elsewhere, just please, be clear on the exact text that professors shall correct to grade your
exam.
• You are NOT allowed to use other sheets apart from the ones included in this exam. If you
need more space for calculations, please use the back of the pages and/or any blank page.
• You are NOT allowed to unstaple the paper.
• You are allowed to prepare a draft of the exam in pencil but please note, answers written in
pencil will not be corrected.
• In case you deem the text is unclear, please use assumptions and specify them.
• For any other issue/information, please refer to the information provided by your instructor
before/during the exam and, broadly speaking, to the rules stated in Honor Code and in the
“rules for the exams” currently in force at Bocconi University.

Please note:
• time available in each single exam session may vary between 60 and 75 minutes;
• in each single exam session MC questions may be 8 or 10;
• Detailed Syllabus for the exam is on Blackboard;
• Where possible, answer options (MC) are simply put in alphabetical/chronological/number
order.

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FITTE
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EXERCISE 1 – 2,5 points

BONUS – PLEASE TICK THE BOX IF YOU HAVE BONUS □

In case you got the “BONUS QUIZZES”, you can skip the
exercise.
*****

Tax payments in Italy are due on 30 June and on 30 November.

On 30.06.2018, both the balance for tax year 2017 and the first advance payment for tax year 2018 are due; on
30.11.2018 only the second advance payment for tax year 2018 is due.

The first advance payment due for tax year 2018 is always equal to 40% of the income tax expense calculated for tax
year 2017, while the second advance payment is always due to 60% of the income tax expense calculated for tax year
2017.

PART A

Assume that the income tax expense for tax year 2017 was Euro 95.000 and that during such year (2017), tax
advances for Euro 76.000 were duly paid.

Required: Please prepare the journal entry for recording the tax transactions of 30 June and 30 November of year 2018.

Date Accounts Amount

Income tax payable (- L) 95.000
June 30 Bank account (- A) 19.000
Income tax receivable (- A) 76.000
Income tax receivable (+ A) 38.000
June 30 Bank account (- A) 38.000
November Income tax receivable (+ A) 57.000
30 Bank account (- A) 57.000

(continues on next page)

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S E
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PART B

Assume that profit before tax, calculated for tax year 2018, is Euro 111.000 and that the company during 2018

• accounted for a “dividend revenue” (collected during the year) for Euro 5.000
• has borne costs for Euro 2.000 for the only private benefit of its main shareholder, Mr. Rolando.

Tax rate is 25%.

Required: Please compute and provide double entries for recording the tax expense of year 2018.

Date Accounts Amount

Dec 31 Income tax expense (+ Exp) 27.062,50
2018 Income tax payable (+ L) 27.062,50

0,25 * [111.000 – (5.000*0,95) + 2.000] = 27.062,50

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FIF A
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EXERCISE 2 – 8 points

Please answer here:

1 C 5 D
2 C 6 D
3 D 7 A
4 D 8 C

1. If current ratio is 1; quick ratio is 0,8; current liabilities are worth € 10.000; net accounts
receivables are worth € 5.000; marketable securities are worth € 0; cash equivalents are
worth € 0; then which is the only possible value of cash?
A. € 0
B. € 2.000
C. € 3.000
D. € 5.000

2. “Outstanding shares” are:

A. “Shares repurchased by a company”.
B. “Shares that have been sold to the public”.
C. “Shares that have been sold to the public”, less “shares repurchased by a
company”.
D. “The maximum number of shares that can be sold, according to the corporate
charter”.

3. If a parent company accounts an investment in an investee using the Equity Method, in

case of distribution of dividends, the effect on the F/S of the parent company will be:
A. Higher assets
B. Higher liabilities
C. Higher revenues
D. None of the preceding answers is correct

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Jane
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4. In case of a cash dividend, the following events take place:

A. Date of payment; successively, Date of record; successively, Declaration date
B. Date of record; successively, Declaration date; successively, Date of payment
C. Declaration date; successively, Date of payment; successively, Date of record
D. Declaration date; successively, Date of record; successively, Date of payment

5. How often do publicly traded corporations typically prepare financial statements for
external reporting purposes?
A. 1
B. 2
C. 3
D. 4

6. Which of the following is likely to be the highest expense in the income statement of a
football club?
A. Amortization expense
B. Income taxes
C. Marketing expenses
D. Salaries & wages

7. If Net Income is $ 500,000, Average Total Liabilities is $ 3,000,000 and Average Total
Equity is $ 2,500,000 then ROA is approx. (please round the amount)

A. 9,09%
B. 16,67%
C. 20%
D. None of the preceding answers is correct

8. Which of the following statements is correct?

A. A ratio calculation is most relevant in isolation
B. It is always preferable to compare a company's performance to industry-wide
ratios rather than to use a competitor's ratios
C. One of the advantages of ratio analysis is that it allows companies of different sizes
to be compared
D. Turnover ratios generally involve a ratio of two balance sheet numbers

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-
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EXERCISE 3 – 7 points
Prepare answer the questions as below detailed. The exrcise is divided in 2 parts (A and B).

Please consider that any receivable and/or payable related to the transactions is immediately collected/paid.

*******
On January 1, 2010, the stockholders' equity section of Zangief Corporation's balance sheet reported
the following:

Common Stock, par $10 $ ………………

Preferred Stock, par $1 40,000

Capital in excess of par value, $50 per share 500,000

Retained Earnings 180,000

Please consider that preferred stock are issued at par, 5% non-cumulative.

During 2010, the following selected transactions occurred (assume they occurred in the order given):
(1) May 1st: issued a stock dividend; 1,000 shares issued when the market price was $12.
(2) June 1st: 100 shares of treasury stock were purchased at $6 per share.
(3) July 1st: Declared and paid a cash dividend of $ 10,000 (please specify separately the amount
pertaining to preferred and common shareholders).

PART A
Required: determine the number of shares and the value of common stock at January 1st.

Number of shares is 10.000 ($ 500.000 cap excess / $ 50 per share)

Value of common stock is $ 100.000 ($ 10 * 10.000)

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I Scaricato
T S
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PART B
Required: prepare the journal entries of Zangief for year 2010. You must specify in correspondence
of each account whether it is an increase or decrease in Assets (± A), Liabilities (± L),
Stockholders ‘Equity (± SE), Expenses (± EXP), Revenues (± REV). In case of missing or wrong
answer, points will be subtracted.

Date Accounts Amount

Retained earnings (- SE) 12.000
May 1 Common stock (+ SE) 10.000
Additional paid-in capital (+ SE) 2.000
June 1 Treasury stock (- SE) 600
Cash (- A) 600
Retained earnings (- SE) 10.000
July 1 Dividend payable PREF (+ L) 2.000
Dividend payable COMM (+ L) 8.000
Cash (- A) 10.000
July 1 Dividend payable PREF (- L) 2.000
Dividend payable COMM (- L) 8.000

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SII
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EXERCISE 4 – 5 points
Use the following information to prepare a statement of Cash Flows for Brickoven Company for the year
ended December 31, 2010. In case you deem that some information is not provided, please use assumptions
and highlight them.

***
The Chief Financial Officer of Brickoven Company provided the following information:

• Net income for the year 2010 was $7,000

• Accounts receivable decreased $ 2,000
• Allowance for doubtful accounts decreased $ 500
• Prepaid expenses increased $1,500
• Inventories increased $21,000
• Patent amortization expense was $10,000
• Interest expense was $3,000 (fully paid during the year)
• During the year, a piece of land was sold:
o Brickoven realized a gain on sale of $ 1,000
o Its net book value before the disposal was $20,000
o The consideration was immediately cashed in
• During the year, a $15,000 cash dividend and a $30,000 large stock dividend were paid; $5,000 treasury
shares were repurchased.

The beginning cash balance was $16,000.

Net CF from Oper Act Net CF from Invest Act

Net Profit 7.000,00 Gain on sale 1.000,00
Patent Amortization 10.000,00 Net Book Value 20.000,00
Gain on sale -1.000,00 TOTAL 21.000,00
Inventories change -21.000,00
Accounts receivable change 2.000,00 Net CF from Financ Act
Allowance change -500,00 Cash dividend -15.000,00
Prepaid assets change -1.500,00 Treasury shares repurchased -5.000,00
TOTAL -5.000,00 TOTAL -20.000,00

Cash BoP 16.000,00

Net CF from Oper Act -5.000,00

Net CF from Invest Act 21.000,00

Net CF from Financ Act -20.000,00

Cash EoP 12.000,00

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Footlose
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EXERCISE 5 – 8 points
Prepare consolidated financial statement as below detailed.

Please note / 1: the drafting of the final column of the chart named “consolidated F/S”, which is a mere sum
of all the figures included in the previous columns, is not graded and not required.

Please note / 2: the number of blank columns in the chart does not reflect the number of columns needed to
answer the exercise.

On January 1, year X, company BISON acquired 80% stake in company VEGA paying a price of
15,000. The balance sheet of VEGA at the date of acquisition showed common stock for 12,000 and
total equity for 14,000. The income statements and balance sheets of the two companies are reported
at the end of the exercise.
At the same date (January 1, X), the fair value of all assets and liabilities of VEGA coincided with
their book value, except for the following:

ASSET CARRYING AMOUNT FAIR VALUE

Equipment 6,000 8,000
Financial liabilities 5,000 4,000

Useful life of equipment is expected to be 10 years. The remaining positive consolidation difference
is allocated to goodwill. Assume that at the date of consolidation the recoverable amount of
goodwill exceeds its carrying amount.

Please compute NC (non-controlling interest) using “proportional goodwill”.

In order to compute the deferred tax effects on surplus, consider a tax rate of 50%.

Moreover, during year X the following intercompany operations took place:

1. VEGA sold goods to BISON at the price of 1,000 and made a profit, thanks to this sale, for
300. At year end, all goods were sold to third parties; at year end, the price was paid only for
70% of its amount.

2. On January, 1 BISON sold to VEGA a plant which was purchased at the price of 5,000
and depreciated for 500. The sale price was 4,000. BISON was going to depreciate the asset
on a straight-line basis, recognizing an annual depreciation of 500; VEGA, however,
recognizes an annual depreciation of 800. at year end, the price was fully paid.

3. During the year, VEGA paid dividends for 2,000.

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Fotta
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INCOME STATEMENT BISON VEGA AGGR (1) (2) (3) (4) (5) (6) (7) (8)
Revenues 10,000 6,000 16,000 -1,000
Expenses 5,000 3,000 8,000 200 -1,000 -500 -300
operating income 5,000 3,000 8,000 0 -200 0 0 500 300 0 0
financial income & expenses -100 -80 -180 -1,600
income BT 4,900 2,920 7,820 0 -200 0 0 500 300 -1,600 0
taxes 1,900 920 2,820 -100 250 150
NET INCOME 3,000 2,000 5,000 0 -100 0 0 250 150 -1,600 -380
NC share of income 0 0 0 380
ASSETS
property plant equipment 10,000 11,000 21,000 2,000 -200 500 300
goodwill 0 0 0 2,600
other intangible assets 1,000 3,000 4,000
investments 15,000 0 15,000 -15,000
deferred tax assets 0 0 0
inventories 1,000 2,500 3,500
receivables 4,000 4,000 8,000 -300
cash & other assets 3,000 1,500 4,500
TOTAL 34,000 22,000 56,000 -10,400 -200 0 -300 500 300 0 0
OWNERS'EQUITY & LIABILITIES
common stock & retained earnings 22,000 12,000 34,000 -14,000 2,000
net income 3,000 2,000 5,000 0 -100 0 0 250 150 -1,600 -380
NC common stock & ret earnings 0 0 0 3,100 -400
NC net income 0 0 0 380
provisions 2,500 1,500 4,000
deferred tax liabilities 200 0 200 1,500 -100 250 150
trade and financial liabilities 3,800 5,000 8,800 -1,000 -300
other liabilities 2,500 1,500 4,000
TOTAL 34,000 22,000 56,000 -10,400 -200 0 -300 500 300 0 0

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Afro Scaricato da Edoardo Toma ([email protected])