Padovani Press was founded in 2003 as a one-person printing firm in a small Italian town. Shortly after its founding, Giovanni Padovani, the owner, decided to concentrate on one specialty line of printing. Because of a high degree of technical proficiency, the company experienced a rapid growth.
A few years later, the company began to suffer from a competitive disadvantage in that the major market for its specialized output was in a metropolitan area over 500 kilometers away from the company’s plant. For this reason, in 2013, having accumulated some extra cash, Mr. Padovani decided to move nearer to his primary market. He also decided to expand and modernize his facilities. After some investigation, an attractive site was found in a town near to his primary market, and the move was made.
1. Analyze the effect of each of these transactions on the items in the balance sheet and income statement. For transactions that affect owner’s equity, distinguish between those that affect the net income of the current year and those that do not. In most cases, the results of your analysis can be set forth most clearly in the form of either journal entries or T accounts.
2. Which balance sheet items would be most affected by the move? Which would remain unchanged?