Problem 1: Joan Company provided the following data for 2019: Value of biological asset at acquisition cost on January 1, 2019 600,000 Fair valuation surplus on initial recognition at fair value on January 1, 2019 700,000 Change in fair value to December 31, 2019 due to growth and price fluctuation 100,000 Decrease in fair value due to harvest 90,000 Decrease due to sale of biological asset 400,000 Required: Prepare all indicated entries for 2019 necessary to record the transactions relating to the biological asset. Determine the carrying amount of the biological asset on December 31, 2019
Problem 1:
Joan Company provided the following data for 2019:
Value of biological asset at acquisition cost on
January 1, 2019 600,000
Fair valuation surplus on initial recognition at fair
value on January 1, 2019 700,000
Change in fair value to December 31, 2019 due to
growth and price fluctuation 100,000
Decrease in fair value due to harvest 90,000
Decrease due to sale of biological asset 400,000
Required:
- Prepare all indicated entries for 2019 necessary to record the transactions relating to the biological asset.
- Determine the carrying amount of the biological asset on December 31, 2019.
Problem 2:
Honey Company has a herd of 10 2-year old animals on January 1, 2019. One animal aged 2.5 years was purchased on July 1, 2019 for P108, and one animal was born on July 1, 2019. No animals were sold or disposed during the year. The active market provided the following fair value less cost to sell:
2 – year old animal on January 1 100
2.5 – year old animal on July 1 108
New born animal on July 1 70
2 – year old animal on December 31 105
2.5 – year old animal on December 31 111
New born animal on December 31 72
3 – year old animal on December 31 120
0.5 – year old animal on December 31 80
Required:
- Prepare all indicated entries for the current year to recognize the transactions relating to the biological asset.
- Indicate the financial statement presentation of the accounts related to the biological assets.
- Determine the price change and physical change in fair value.
Problem 3:
Farmland Company produces milk ob its farms. The entity produces 20% of the community’s milk that is consumed. Farmland Company owns 5 farms and has a stock of 2,100 cows and 1,050 heifers.
The farms produce 800,000 kilograms of milk a year and the average inventory held is 15,000 kilograms of milk. However, on December 31, 2019 the entity is currently holding 50,000 kilograms of milk in powder. On
December 31, 2019, the biological assets are:
Purchased on or before January 1, 2019 (3years old) 2,100 cows
Purchased on January 1, 2019 (2 years old) 300 heifers
Purchased on July 1, 2019 (1.5 years old) 750 heifers
No animals were born or sold during the current year. The unit fair value less cost to sell is as follows:
January 1, 2019:
1-year old 3,000
2-year old 4,000
July 1, 2019:
1-year old 3,000
December 31, 2019:
1-year old 3,200
2-year old 4,500
1.5-year old 3,600
3-year old 5,000
The entity has had problems during the year. Contaminated milk was sold to customers. As a result, milk consumption has gone down.
The entity’s business is spread over different parts of the country. The only region affected by the contaminations was Batangas. However, the cattle in this area were unaffected by the contamination and were healthy.
The entity feels that it cannot measure the fair value of the cows in the region because of the problems created by the contamination. There are 600 cows and 200 heifers in the Batangas farm and all these animals had been purchased on January 1, 2019.
Required:
- Determine the fair value of the biological assets on January 1, 2019.
- Determine the fair value of the biological assets purchased on July 1, 2019.
- Determine the fair value of the biological assets on December 31, 2019.
- Determine the change in fair value and indicate the price change and physical change.
- Explain the measurement of the milk inventory on December 31, 2019.
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