Chapter 9 – Biological Assets

CHAPTER 9
BIOLOGICAL ASSETS

9.1 (ABC Farms)

(a) Carrying value of Biological Assets, 12/31/08 P2,800,000
Cost of biological assets purchased during 2009 3,200,000
Fair valuation loss on initial recognition ( 150,000)
Change in fair value due to biological transformation and
price fluctuations 2,000,000
Decrease in fair value due to harvest (1,000,000)
Biological Assets, 12/31/09 P6,850,000

(b) Loss on initial recognition at FV less POS Cost P 150,000

Increase in FV less POS Costs P2,000,000

9.2 (Ranchero Corporation)

(a)Balance of Biological Assets at December 31, 2008
3 years old = 2,000 x P44,000 P88,000,000
2 years old = 1,500 x P35,000 52,500,000 P140,500,000
Increase in fair value
2,000 x (P55,000 – P44,000) P22,000,000
1,500 x (P47,000 – P35,000) 18,000,000 40,000,000
Balance, December 31, 2009 (at FV less POS Cost) P180,500,000

(b) Increase in FV less POS Cost due to

(1) Price Change :
3 year old cows 2,000 x (P47,000 – P44,000) P6,000,000
2 year old heifers 1,500 x (P37,500 – P35,000) 3,750,000
Increase in FV due to Price Change P9,750,000

(2) Physical Change

4 year old cows 2,000 x (P55,000 – P47,000) P16,000,000
3 year old cows 1,500 x (47,000 – P37,500) 14,250,000
Increase in FV due to Physical Change 30,250,000

(c) FV less POS Costs at December 31, 2009

4 year old cows 2,000 x P55,000 P110,000,000
3 year old cows 1,500 x P47,000 70,500,000
FV less POS costs at December 31, 2009 P180,500,000

(d) Entry at yearend

Biological Assets 40,000,000
Gain – Increase in FV less POS Cost due to Price Change 9,750,000
Gain – Increase in FV less POS Cost due to Physical Change 30,250,000

9-3
(a) Price Change
2 year-old animals on Jan. 1 10 x (P10,500 – P10,000) P5,000
2.5 year-old animal on July 1 1 x (P11,100 – P10,800) 300
Animal born on July 1 1 x (P7,200 – P7,000) 200
Change in FV less POS Cost due to Price Change P5,500

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Physical Change
3 year-old animals on 12/31 10 x (P12,000 – P10,500) P15,000
3 year old animal on 12/31 1 x (P12,000 – P11,100) 900
Born on July 1 (upon birth) 7,000
On December 31 P8,000 – P7,200 800
Change in FV less POS Cost due to Physical Change P23,700

(b) Entries for the Year

2009
July 1 Biological Assets 10,800
Cash 10,800
Purchased one animal.

1 Biological Assets 7,000

Increase in FV less POS Cost due to Physical Change 7,000

Dec 31 Biological Assets 22,200

Increase in FV less POS Cost due to Price Change 5,500
Increase in FV less POS Cost due to Physical Change
(23,700 – 7,000) 16,700

31 Cash {2 x (13,500 – 1,500) 24,000

Biological Assets 24,000

(c) Balance, 1/1/09 10 animals x P10,000 P100,000

Purchase 10,800
Change in FV less POS Cost due to Price Change 5,500
Change in FV less POS Cost due to Physical Change
(including the birth of one animal) 23,700
Sale at FV less POS cost (24,000)

Balance, December 31, 2009 P116,000

(d) The balance at December 31, 2009 is composed of the following:

3 year old animals 9 animals x P12,000 P108,000
1 year old animal 1 animal x P8,000 8,000
Total P116,000

MULTIPLE CHOICE
MC1 B MC8 B
MC2 D MC9 A
MC3 C MC10 B
MC4 D MC11 B
MC5 D MC12 B
MC6 B MC13 A
MC7 B MC14 C
MC15 C 450,000 + 250,000 + 220,000 + 64,000 – 290,000 = 694,000
MC16 C 220,000 + 64,000 = 284,000
MC17 C {(15,000-13,000) x 25} +{ (7,000-5,000) x 5 } + (4,000 x 5) = 80,000
MC18 A {13,000 – 12,000) 25 + (5,000 – 4,000) x 5 = 30,000
MC19 D (25 x 15,000) + (5 x 7,000) = 410,000

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MC20 B 30,000 + 80,000

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