Angeles University Foundation

Angeles City

College of Business and Accountancy

Investment Property
Biological Assets
Agriculture

Prepared by:

Kim Veatrice P. Cunanan

BSMA-3C

Submitted to:

Sir Patrick Cura

College Instructor

Date submitted:

October 12, 2016

I. Multiple Choice

1. Which of the following statements best describes investment property?

a. Property held for sale in the ordinary course of business
b. Property held for use in the production
c. Property held to earn rentals or for capital appreciation
d. Property held for capital appreciation

Answer: C
Source: Financial Accounting 1 by Valix
Topic: Investment Property

2. Investment of property includes all of the following, except?

a. Land held for long-term capital appreciation.
b. Land held for currently undetermined use.
c. Building held by finance leased.
d. Property held for sale in the ordinary course of business.

Answer: D
Source: Financial Accounting 1 by Valix
Title: Investment Property

3. Which of the following is an investment property?

a. Property being constructed or developed on behalf of third parties.
b. Property that is being constructed and developed as investment property.
c. Property held for future development and subsequent use as owner-occupied
property.
d. Owner-occupied awaiting disposal.

Answer: B
Source: Financial Accounting 1 by Valix
Topic: Investment Property

4. Which of the following statements best describes owner-occupied property?

a. Property held for sale in the ordinary course of business
b. Property held for use in the production and supply of goods and service and property
held for administrative purposes
c. Property held to earn rentals
d. Property held for capital appreciation
Answer: B
Source: Financial Accounting 1 by Valix
Topic: Investment Property
5. Biological Assets
a. Are found only in Biotech entities.
b. Are living animals or living plants and must disclosed as a separate line item in the
statement of financial position.
c. Must be measured at cost.
d. Do not generally have future economic benefits.

Answer: B
Source: Financial Accounting 1 by Valix
Topic: Biological Asset

6. It is the management by an entity of the biological transformation and harvest of

biological assets for sale or for conversions into agricultural produce or into additional
biological asset.
a. Agricultural activity
b. Biological activity
c. Economic activity
d. Developmental activity
Answer: A
Source: Financial Accounting 1 by Valix
Topic: Agriculture
7. Biological assets are measured at
a. Cost
b. Lower cost and net realizable value
c. Net realizable value
d. Fair value less cost of disposal

Answer: D
Source: Financial Accounting 1 by Valix
Topic: Biological Asset

8. Agriculture produce is measured at

a. Fair value
b. Fair value less cost o disposal at the point of harvest
c. Net realizable value
d. Net realizable value less normal profit margin
Answer: B
Source: Financial Accounting 1 by Valix
Topic: Biological asset
9. Agriculture produce is
a. The harvested product from biologica asset.
b. Valued at the time of harvest at the cost of production.
c. Valued at each reporting period at fair value less cost of disposal.
d. All of the choices are correct regarding agricultural produce.
 Answer: A
Source: Financial Accounting 1 by Valix
Topic: Biological Asset

10. Agriculture activity results in which of the following type of asset?

a. Biological asset only
b. Agricultural produce only
c. Both biological asset and agricultural produce
d. Neither biological asset nor agricultural produce

Answer: C
Source:Financial Accounting 1 by Valix
Topic: Biological Asset

11. If an entity owns and manages a hotel, services provided to guest are a significant
component of the arrangement as a whole. In such case, the hotel is classified as
a. Investment property
b. Owner occupied property
c. Partly investment property
d. Neither investment property or owner occupied property

Answer: B
Source: Financial Accounting 1 by Valix
Topic: Invesment Property

12. Which statement is incorrect concerning initial measurement of an investment property?

a. The investment property shall be measured initially at fair value.
b. Start up cost
c. If payment for an investment property is deferred.
d. Interest held under a lease

Answer: A
Source: Financial Accounting 1 by Valix
Topic: Invesment property

13. Agricultural activity includes all of the following, except?

a. Raising livestock
b. Perennial cropping
c. Aquaculture
d. Ocean fishing

Answer: D
Financial Accounting 1 by Valix
Biological Asset
14. Biological transformation results from asset changes through all of the following, except?
a. Growth
b. Degeneration
c. Procreation
d. Production of agricultural produce

D.
Financial Accounting 1 by Valix
Biological Asset

15. Directly attributable expenditures related to investment property include

a. Professional fees for legal services, property and transfer taxes and other transaction
costs.
b. Start up costs.
c. Operating losses incurred before the investment
d. Abnormal amounts of wasted material, labor and other resources incurred in
constructing or developing the property.
A.
Financial Accounting 1 by Valix
Invesment Property
16. What is the best evidence of fair value of an investment property?
a. Quoted price in an active market for identical asset.
b. Quoted price in an active market for a similar asset.
c. Quoted price in an inactive market for a identical asset
d. Unobservable input price for the asset.
A.
Financial Accounting 1 by Valix
Invesment property

17. It is a market in which transactions for the asset or liability take place with sufficient
regularity and volume to provide pricing information on an ongoing basis.
a. Active market
b. Principal market
c. Global market
d. Financial market

A
Financial Accounting 1 by Valix
Biological Asset

18. Generally speaking, biological assets relating to agricultural activity shall be measured
using
a. Historical asset
b. Historical cost less depreciation less impairment
 c. A fair value approach
d. Net realizable value

C
Financial Accounting 1 by Valix
Biological Asset

19. An entity had a plantation forest that is likely to be harvested and sold in 30years. The
income shall be accounted for in which of the following?
a. No income shall be reported annually until first harvest and sale in 30years.
b. Income shall be measured annually and reported using a fair value
c. The eventual sale proceeds shall be estimated and matched to the profit
d. The plantation forest shall be measured every 5 years.

B
Financial Accounting 1 by Valix
Biological Asset

20. Subsequent to initial recognition, the investment property shall be measured at

a. Fair value
b. Cost less any accumulated depreciation and any accumulated impairment losses
c. Revalued amount
d. Either fair values or cost less any accumulated depreciation and any accumulated
impairment losses

D
Financial Accounting 1 by Valix
Invesment Property

21. When the entity uses the cost model, transfers between investments property, owner
occupied property and inventory shall be made at
a. Fair value
b. Carrying amount
c. Cost
d. Assessed value

B
Financial Accounting 1 by Valix
Invesment Property

22. A transfer from investment property carried at fair value to owner occupied property shall
be accounted for at
a. Fair value, which becomes the deemed cost
b. Carrying amount
c. Historical cost
d. Fair value
 A
Financial Accounting 1 by Valix
Investment Property

23. Under IFRS, assets classified as investment property are

a. Held for rental income
b. To be sold for a quick profit
c. Held for rental income or to be sold for a quick profit
d. Held for sale in the ordinary course

C
Financial Accounting 1 by Valix
Investment Property

24. What is the measurement basis for valuing biological assets and agricultural produce?
a. Historical cost
b. Current cost
c. Present value
d. Fair value

D
Financial Accounting 1 by Valix
Biological Asset

25. If an inventory is transferred to investment property that is to be carried at fair value, the
re-measurement to fair value is
a. Included in profit or loss
b. Included in other comprehensive income
c. Included in retained earnings
d. Accounted for as revaluation surplus

A
Financial Accounting 1 by Valix
InvesmentPorperty

II. Identification

______________ 1.The amount at which an asset is currently presented in the statement of

financial position.

Carrying Amount

Wiley IFRS 2014

_______________2. The amount of cash or cash equivalents paid or the fair value of other
consideration given to acquire an asset at the time of its acquisition or construction or, where
applicable, the amount attributed to that asset when initially recognized.
 Cost
Wiley IFRS 2014

_______________3.The price that would be the price that would be received to sell an asset or
paid to transfer a liability on an orderly transaction between market participants at the
measurement date.

Fair value
Wiley IFRS 2014

_______________4. An asset held by an entity for purposes of accretion of wealth through

distributions of interest, royalties, dividends, and rentals.

Investment
Wiley IFRS 2014

_______________5.Property (land or a building) to earn rentals or for capita appreciation

purposes or both, as opposed to being held as.

Investment property
Wiley IFRS 2014

_______________6. Where the fair value of the biological asset cannot be determined reliably,
the biological asset shall be measure at

Fair value model

Wiley IFRS 2014

_______________7. A gain or loss arising on the initial recognition of a biological asset and
from change in the fair value less cost of disposal of a biological asset shall be included in

Profit or loss
Wiley IFRS 2014

______________8. Where there is a long aging or maturation process after harvest, the
accounting for such products shall be dealt with by

PAS 2, Inventories
Wiley IFRS 2014

______________9. When the agricultural produce is harvested, the harvest shall be accounted
for as inventory. For the purpose, cost at the date of harvest is deemed to be

Current Cost
Wiley IFRS 2014

______________10. Gain or loss from the disposal of investment property shall be determined
as the difference between the
 Historical Cost
Wiley IFRS 2014

III. TRUE OR FALSE

1. An investment property shall be measured initially at cost.

True
Financial Accounting 1 by Valix
invesment property

2. Building used in business is considered an investment property.

False
Financial Accounting 1 by Valix
Investment Property

3. Dairy Cattle, chickens and tress are classified as biological asset.

True
Financial Accounting 1 by Valix
Biological Asset

4. Apple would be classified as agricultural produce.

True
Financial Accounting 1 by Valix
Biological Asset

5. Bilogical transformation comprises the processes of growth, degeneration, production

and procreation that cause changes in a biological asset.
True
Financial Accounting 1 by Valix
Biological Asset
III Problems

1. Forester Company provided the following assets in a forest plantation:

Freestanding tress 5,100,000

Land under trees 600,000
Roads in forests 300,000
Animals related to recreational activities 1,000,000
Bearer plants-rubber trees and grape vines 1,500,000
 What total amount of the assets should be classified as biological assets?

a. 5,100,000
b. 7,600,000
c. 6,600,600
d. 8,500,000

Solution:

Only the freestanding trees should be classified as biological assets. The land
under trees and roads in forests should be included in PPE. Under IFRS, the
animals related to recreational activities and the bearer plants are accounted for
as property, plant and equipment.

Answer: A
Practical Accounting 1by Valix
Biological Assets

2. Micko Company provided the following data:

Value of biological asset at acquisition asset on December 31, 2015

600,000
Fair valuation surplus on initial recognition at fair value on December 31, 2015
700,000Change in fair value to December 31, 2016 due to growth and price
fluctuation 100,000Decrease in fair value due to harvest in 2016 90,000

What is the carrying amount of the biological asset on December 31, 2016?

a. 1,400,000
b. 1,310,000
c. 1,300,000
d. 1,490,000

What is the gain from change in fair value of biological asset that should be reported in the 2016
income statement?

a. 100,000
b. 800,000
c. 710,000
d. 10,000

Solution:
Acquisition cost –December 31,2015 600,000
Increasen in Fair value on initial recognition
700,000Change in fair value in 2016
100,000 Decrease in fair value due to harvest
(90,000)Carrying amount – December 31, 2016
1,310,000
Change in fair value in 2016 100,000
Decrease in fair value due to harvest in 2016 (90,000)
Net gain from change in fair value in 2016 10,000

Answer: B & D
Practical Accounting 1 by Valix
Biological Asset

3. Nagmahal Company is engaged to raising dairy livestock. The entity provided the
following information during the current year.
Carrying amount on January 1 5,000,000
Increase due 2,000,000
Gain arising from change in fair value less cost 400,000
Attributable to physical change 600,000
Decrease due to sales 850,000
Decrease due to harvest 200,000

What is the carrying amount of the biological asset on December 31?

a. 6,950,000
b. 6,000,000
c. 8,000,000
d. 7,150,000

Solution:
Carrying amount- January 1 5,000,000
Increase due to purchases 2,000,000
Price change 400,000
Physical change 600,000
Decrease due to sales (850,000)
Decrease due to harvest (200,000)

Carrying amount – December 31 6,950,000

A.
Practical Accounting one by Valix
biological asset

Problem 4

Nasaktan Company produced milk for sale to local and national ice cream producers. The entity
began operations at the beginning of current year by purchasing 650 milk cows for 8,000,000.

The entity provided the following information for the current year:

Acquisition cost, January 1 8,000,000

Change in fair value due to growth and price changes 2,500,000
Decrease in fair value due to harvest 250,000
Milk harvested but not yet sold 400,000

What amount of gain on change in fair value should recognized for biological asset in the
current year?
a. 2,500,000
b. 2,250,000
c. 2,900,000
d. 2,650,000

What amount of gain on change in fair value should be reported for agricultural produce
in the current year?
a. 2,250,000
b. 400,000
c. 150,000
d. 0

Solution:
Change in fair value due to growth and price changes 2,500,000
Decrease in fair value due to harvest (250,000)
Net gain from biological asset 2,250,000

Inventory 400,000

Gain on agricultural produce 400,000

Problem 5

Nag-accounting company provided the following information for the year ended December
31,2015:

Cash 500,000
Trade and other receivables 1,500,000
inventories 100,000
Nag-accounting livestock-immature 50,000
Mature 400,000
Property, plant and equipment 1,400,000
Trade and other payables 520,000
Note payable long term 1,500,000
Share capital 1,000,000

What is the net income for 2015?

a. 650,000
b. 600,000
c. 130,000
d. 185,000

What is the fair value of biological asset on December 31?

a. 550,000
b. 450,000
c. 500,000
d. 400,000

Solution:

Fair value of milk produced 600,000

Gain from change in fair value 50,000

Total income 650,000 Inventories

used (140,000) Staff
costs (120,000)
Depreciation expense (120,000)
Other, operating expenses (205,000)

Income before income tax 185,000

Income tax expense(55,000) Net
income 130,000

Livestock-immature 50,000
livestock-mature 400,000
Fair value of biological assets 450,000

Answer: C &B
Practical Accounting one by Valix
Biological Assets

Problem 6

Colombia Company is a producer of coffee. The entity is considering the valuation of harvested
coffee beans. Industry practice is to value the coffee beans at market value and uses as
reference a local publication “accounting for successful farms”.

On December 31, 2015. The entity considering the valuation of harvested coffee beans costing
P3, 000,000 and with fair value less cost of disposal of P3,500,000 at the point harvest.
Because of long aging and maturation process after harvest. The harvested coffee beans were
still on hand on December 31, 2016.

On such date, the fair value less cost of disposal is 3,900,000 and net realizable value is
3,200,000.

What is the measurement of the coffee beans inventory on December 31, 2016?

a. 3,000,000
b. 3,500,000
c. 3,200,000
d. 3,900,000

Solution:

Fair value measurement stops at the point of harvest and PAS 2 on inventory applies after such
date.

Accordingly, the coffee beans inventory shall be measured at the lower of cost and net
realizable value on December 31, 2016.

The fair value less cost of disposal of 3,500,000 at the point of harvest is the initial cost of coffee
beans inventory for purposes of applying PAS 2.

The net realizable value of 3,200,000 is the measurement on December 31,2016 because this
is lower than the deemed cost of 3,500,000.

Answer: C
Practical Accounting one by Valix
Biological Asset

Problem 7

Honey Company has a herd of 102 year old animals on January 1, 2015. One animal aged 2.5
years was purchased on July 1, 2015 for 108, and one animal was born on July 1, 2015. No
animals were sold or disposed of during the year. The fair value less cost of disposal per units is
as follows:

2-year old animals on 100

January 1 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
Newborn animal on December 31 72
3 year old animal on December 31 120
0.5 year old animal on December 31. 80

1. What is the fair value of the biological assets on December 31?

a. 1,400
b. 1,320
c. 1,440
d. 1,360
2. What amount of gain from change in the fair value of biological assets should be
recognized in the current year?
a. 222
b. 292
c. 300
d. 332
3. What is the gain from change in fair value due to price change?
a. 292
b. 222
c. 237
d. 55

Solutions:

Fair value of 3-year old animals on December 31 (11xP120) 1,320

Fair value of 0.5 year old animal on December 31, the new born (1xP80) 80
Total fair value- December 31 1,400

Fair value of 10 animals on January 1 (10x100) 1000

Acquisitions cost of one animal on July 1 108
Total carrying amount- December 31 1,108

Fair value on December 31 1,400

Carrying amount 1,108
Gain from change in fair value 292

Gain form change in fair value due to price change:

10 2-year old animals (105-100=5x10) 50

1 2.5 year old animal (111-108=3x1) 31
new born on July 1 (72-70=2x1) 2
total 55

Gain from change in fair value due to physical change:

10 3 year old animals acquired January 1 (120-105=15x10) 150

1 3 year old animals acquired July 1 (120-111=9x1) 9
1 newborn on July 1 (80-72=8x1) 8
1 new born (70x1) 70
Total: 237

Price change 55
Physical change 237
total gain 292

Answer: A,B,D
Practical Accounting one by Valix
Biological Assets

Problem 8

Farmland Company produces milk on its farms. The entity producers 20% of the community
milk that is consumed farmland Company owns 5 farms and had a stock of 2,100 cows and
1.050 heifers.

The farms produce 800,000 kg of milk a year and the average inventory held is 15,000 kg of
milk. However, on December 31, 2015 the entity is currently holding 50,000kg of milk in powder.

On December 31, 2015 the biological assets are:

Purchased before January 1, 2015 3 year old 2,100 cows

Purchased on January 1, 2015 2 year old 300 heifers
Purchased on July 1, 2015 1.5 year old 750 heifers

No animals were born on sold during the current year. The unit fair value less cost of disposal is
as follows.

January 1, 2015
1-year old 3,000
2-year old 4,000

July 1, 2015
1-year old 3,000

December 31, 2015

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 problem 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 contamination was Batangas.

1. What was the fair value of biological assets on January 1, 2015?

a. 9,300,000
b. 3,000,000
c. 3,750,000
d. 3,375,000
2. What is the fair value of biological assets on July 1, 2015?
a. 2,250,000
b. 3,000,000
c. 3,750,000
d. 3,375,000
3. What is the fair value of biological assets in December 31, 2015?
a. 14,550,000
b. 15,750,000
c. 15,225,000
d. 11,850,000
4. What is the increase in fair value of biological assets on December 31, 2015?
a. 3,000,000
b. 5,250,000
c. 4,950,000
d. 6,150,000
5. What is the increase in fair value of biological assets due to physical change?
a. 1,260,000
b. 1,740,000
c. 3,000,000
d. 1,440,000

Solutions:
(2,100x4,000) 8,400,000
(300x3,000) 900,000
Total fair value-January 1 9,300,000

Heifers purchased 1year old 2,250,000

(2,100x5,000) 10,500,000
300x4,500 1,350,000
750x3,600 2,700,000

Total 14,550,000

Answer: A,A,A,A,B
Practical Accounting one by Valix
Biological Assets

Problem 9

Galore Company ventured into construction of a condominium on Makati which is rated as the
largest state of the art structure. The entity board of directors decided that instead of selling the
condominium, the entity would hold this property for purposes of earning rentals by letting out
space to business executives in the area.

The construction of the condominium was completed and the property was placed in service on
January a,2015. The cost of the construction was 50,000,000. The useful life of the
condominium is 25 years and its residual value is 5,000,000.

An independent valuation expert provided the following fair value at each subsequent year-end:

December 31, 2015 55,000,000

December 31, 2016. 53,000,000
December 31, 2017 60,000,000

1. Under the cost model what amount should be reported as depreciation of investment
property for 2015?
a. 1,800,000
b. 2,000,000
c. 2,220,000
d. 0
 2. Under the fair value model, what amount should be recognized as gain from change in
fair value in 2015?
a. 5,000,000
b. 3,000,000
c. 7,000,000
d. 0

Solution:

Cost of investment property 50,000,000

Residual value (5,000,000)
Depreciable amount 45,000,000
Annual depreciation 45,000,000/25) 1,800,000

Journal entry on December 31, 2015

Investment property 5,000,000

Gain from change in fair value 5,000,000

Fair value- December 21 55,000,000

cost- January 1 50,000,000
_ ___________

Gain from change in fair value 2015 5,000,000

Journal entry on December 2016

Loss from change in fair value 2,000,000

Investment property 2,000,000

Fair value – December 2016 53,000,000

carrying amount – December 2015 55,000,000

__________
loss Gain from change in 2016 (2,000,000)
 Answer: A,A
Practical Accounting One by Valix
Cost Model & Fair Value model

Problem 10

Fortitude Company purchased cattle at an auction for 200,000 on July 1, 2014. Cost of
transporting the cattle back to the company’s farm was 2,000 and the company would have to
incur cost similar transportation cost if it was to sell the cattle in the auction, in addition an
auctioneer’s fee of 2% sales price. What amount should the biological assets be initially
recognized?

a. 194,000
b. 196,000
c. 198,000
d. 200,000

Solution:

Fair Value 200,000

Transportation costs (2,000)
Auctioneers fee (4,000)
_ _________
Adjusted fair value 194,000

Answer: A
Practical Accounting One by Conrado O. Uberta
Cost at Initial Recognition

Problem 11

Solo Company acquired forest assets for a lump sum amount of 20,000,000 which is equal to
the lump sum value of the group of assets. At the time of purchase the company in unable to
determine the fair value of the trees separately since no active market was clearly available.
The other assets in the group had a determinable fair value. The forests assets are listed below
and their related fair value:
Land under trees 2,000,000
Roads in forest 1,000,000

1. What amount should the biological asset is initially recorded?

2. What amount should the non-current non-depreciable asset be usually recorded?
3. What amount should the non current depreciable asset be initially recorded?

Solution:

Total fair value of the group 20,000,000

Less: Fair value of other assets:
Land 2,000,000
Roads 1,000,000 3,000,000
Fair value of biological asset __________ 17,000,000

Answer: 17,000,000
2,000,000
1,000,000
Practical Accounting One by Conrado O. Uberta
Cost at Initial Recognition

Problem 12

Central Farm Corporation reported the following lists of biological asset and agricultural produce
for the year ended December 31, 2014:

Assets Fair Value

Diary cattle 3,000,000
Beef cattle 5,000,000
Sheep 2,000,000
Calves on dairy cattle 1,000,000
Calves on beef cattle 1,500,000
Lambs 800,000
Milk on dairy cattle 500,000
Carcass on beef 600,000
Wool 400,000

1. What amount of biological asset should Central Farm Company report in its December
31, 2014 statement of financial problem?
2. What amount should central farm company report as inventory related to the above
biological assets?

Solution:

Mature biological assets:

Dairy cattle 3,000,000
Beef cattle 5,000,000
Sheep 2,000,000 P10,000,000
Immature biological assets:
Calves on dairy cattle 1,000,000
Beef cattle 1,500,000
Lambs 800,000 3,300,000
Total fair value of biological assets P13,300,000

Answer: 13,300,000
1,500,000
Practical Accounting One by Conrado O. Uberta
Measurement of Biological Asset

Problem 13

Fortune Company purchased Dairy cattle at an auction for 300,000 on July 1, 2014. Cost of
transporting the cattle back to the company’s farm was 3,000 and the company would have to
incur cost similar transportation cost, in addition an auctioneer’s fee of 2% of sales price.

On December 31, 2014, after taking into account and location, the fair value of the biological
asset had increased to 500,000.

1. What amount should the biological assets be initially recognized?

2. What amount should be the biological assets be reported in the December 31, 2014
statement of financial position?
 3. What amount of gain or loss should the company include in the statement of
comprehensive income due to the change in the fair value of the biological assets?

Solution:

1. Fair value 300,000

Transportation costs (3,000)
Auctioneer’s fee (6,000)
Adjusted fair value 291,000
2. Fair Value 500,000
transport cost (3,000)
Auctioneer’s fee (10,000)
Adjusted fair value 487,000
3. Fair value on December 31, 2014 487,000
July 1, 2014 (291,000)
Increase in fair value 196,000

Answer: 291,000
487,000
196,000
Practical Accounting One by Conrado O. Uberta
Measurement of Biological Asset

Problem 14

Vortex Company’s standing cane fair value as of January 1, 2014 was 2,700,000 and as
December 31, 2014 was 2,250,000. The fair value of the agricultural produce harvested during
the period was 2,100,000 on the respective dates of harvest.

What net amount of gain or loss should Cortex Company report in its December 31, 2014 profit
or loss related to the biological asset and agricultural produced?

Solution:

Total value fair end of year

 Biological asset 450,000

Agricultural produced 420,000 870,000

Less: fair value start of year 560,000

Net increase in fair value to profit or loss 310,000

Answer: 310,000
Practical Accounting One by Conrado O. Uberta
Measurement of Biological Asset

Problem 15

On December 31, 2014, Sony Company reported the following information involving its
biological assets:

Biological assets, at cost on December 31, 2012 6,000,000

Fair value surplus 7,000,000
Change in fair value to December 31, 2014 1,000,000
Decrease in fair value due to harvest 2014 900,000

1. What amount should the biological asset be reported in the December 31, 2014 balance
sheet?
2. What amount of net gain should Sony Company report in its December 31, 2014 income
statement?

Solution:

Biological assets, cost on December 31, 2014 6,000,000

Fair value surplus 7,000,000

Change in fair value 1,000,000
Decrease in fair value (900,000)
Fair value as of December 31, 2014 13,100,000

Change in fair value to December 31, 2014 1,000,000

Decrease in fair value due to harvest during 2014 (900,000)
Net change in fair value – reported in income statement 100,000
 Answer: 13,100,000
100,000
Practical Accounting One by Conrado O. Uberta

Measurement of Biological Asset

Problem 16

Rainbow Company has the following information pertaining to its biological assets for the year
2014:

A herd of 100, 2-year old animals was held at January 1, 2014. Ten animals aged 2.5 were
purchased on july 1, 2014 for 5,400 and ten animals were born on July 1, 2014. No animals
were sold or disposed of during the period. Per unit fair value less estimated point-of-sale costs
were as follows:

2 year old animal at January 1, 2014 5,000

Newborn animal at July 1, 2014 3,500
2-5 year old animal at July 1, 2014 5,400
Newborn animal at December 31, 2014 3,600

0.5 year old animal at December 31, 2014 4,000

2.0 year old animal at December 31, 2014 5,250
2.5 year old animal at December 31, 2014 5,550
3 year old animal at December 31, 2014 6,000

1. How much of the increase in the fair value of the biological assets due to price change?

2. How much of the increase in the fair value of the biological assets due to physical change?

3. What is the fair value of the biological assets as of December 31, 2014?

Solutions:

Increase in fair value less estimated point of sale cost due to price change:
100 (5,250-5,000) 25,000
10(5,550-5,400) 1,500
10(3,600-3,500) 1,000
Total 27,500
100 (6,000-5250) 75,000
10(6,000-5,500) 4,500
10(4,000-3,600) 4,000
10x3,500 35,000
Total 118,500

Answer: 27,500
118,500
Practical Accounting One by Conrado O. Uberta
Measurement of Biological Asset

Problem 17

Eragon Company and its subsidiaries own the following properties

At year-and

Land help by eragon for undetermined use 5,000,000

A vacant building owned by eragon and to be
Leased uot under an operating lease 3,000,000
Property helps by a subsidiary of eragon, a real
Estate film,in the ordinary of eragon couse of business 2.000.000
Property help by eragon for use in production 4,000,000
Building owned by a subsidiary of erafon and
For which the subsidiary provides sucrity
And maintenance service to the lessees 1,500,000
Land leased by eragon to a subsidiary under an
Operating lease 2,500,000
Property under construction for use as investment
Property 6,000,000
Land help for future factory site 3,500,000
Machinery leasd uot by eragon to an unrelated
Party under an operating lease 1,000,000

1 what the total investment property that should be reported in the

Consolidated statement of financial position of the parent and
Its subsidiaries?

a. 12,000,000
b. 15,500,000
c. 10,500,000
d. 9,5000,000

2 what total amount should be considered as owner-occupied

Property and include in property, plant and equipment in the
Consolidated statement of financial position?

a. 11,000,000
b. 13,000,000
c. 10,500,000
d. 8,500,000

Solution 43-2
Question 1 answer b
Land for undetermined use 5,000,000
Vacant building to be leased out under an operating lease 3,000,000
Building owned and for which the subsidiary provide
Security and maintenance service to the lessees 1,500,000
Property under construction for use as investment property 6,000,000

Total investment property 15,500,000

Question 2 answer a

Property help for use in production 4,000,000

Land lease by parent to subsidiary under
An operating lease 2,500,000
Land help for future use as factory site 3,500,000
Machinery lease out to an unrelated party under
An operating lease 1,000,000

Total operating, plant ang equipment 11,000,000

The property by a subsidiary in the ordinary cause of business is include in

Inventory.

The land leased by the parent to the subsidiary under an operating lease is owned-occupied
Property for purpose of consolidated financial statement.

However, from the perspective of separate financial statement of the parent,the

Land its an investment property.

The machinery leased out to a un related party is owned-occupied property investment

Because investment property include only land and building and not movable
property, like machinery.

B&A

Practical Accounting One by Conrado O. Uberta

Measurement of Biological Asset
PROBLEM 18

Bona company purchased an investment property on January 1,2013 for P2,2000,000

The property had a useful life of 40, years and on December 31,2015 had a fair value of
P3, 000,000.

On December 31, 2015,the property was sold for net proceeds of

P2, 900,000. The entity used the cost model to account for the
Investment property.
Bona company purchased an investment property on January 1,2013 for P2,2000,000
The property had a useful life of 40, years and on December 31,2015 had a fair value of
P3, 000,000.

On December 31, 2015, the property was sold for net proceeds of
P2, 900,000. The entity used the cost model to account for the
Investment property.

1 what is the carrying amount of the investment property on December 31,2015?

a. 2.200.000
b. 2.035.000
c. 2.145.000
d. 2.090.000

2 What is the gain or loss to be recognized for the year ended December31,2015 regarding
The disposal of property?

a. 865,000 gain
b. 810,000 gain
c. 100,000 loss
d. 700,000 gain

Solution 43-3

Question 1 answer b

Cost-January 1, 2013 2,200,000

Accumulated depreciation (2,200,000/40 x 3 years) ( 165,000)

Carrying amount-December 31,2015 2,035,000

Question 2 answer a

Sale price 2,900,000

Carrying amount-December 31,2015 2,035,000
Gain on disposal of property 865,000

1 what is the carrying amount of the investment property on December 31,2015?

 e. 2.200.000
f. 2.035.000
g. 2.145.000
h. 2.090.000

2 What is the gain or loss to be recognized for the year ended December31,2015 regarding
The disposal of property?

e. 865,000 gain
f. 810,000 gain
g. 100,000 loss
h. 700,000 gain

Solution

Question 1

Cost-January 1, 2013 2,200,000

Accumulated depreciation (2,200,000/40 x 3 years) ( 165,000)

Carrying amount-December 31,2015 2,035,000

Question 2

Sale price 2,900,000

Carrying amount-December 31,2015 2,035,000
Gain on disposal of property 865,000
B,A
Practical Accounting One by Conrado O. Uberta
Measurement of Biological Asset

Problem 19

Dayanara Company owned three properties which are classified as investment

Property.

Initial Fair value Fair value

Cost 12/31/2015 12/31/2016

Property 1 2,700,000 3,200,000 3,500,000

Property 2 3,450,000 3,050,000 2,850,000
Property 3 3,300,000 3,850,000 3,600,000

Each property was acquired three years ago useful life 25 years. the accounting policy
It’s to use to fair value model for investment property.
What is the gain or loss to be recognize for the year ended
December 31, 2016?

a. 189,000 loss
b. 150,000 loss
c. 300,000 gain
d. 450,000 loss

Solution

Fair value fair value

12/31/2015 12/31/2016 gain(loss)

Property 1 3,200,000 3,500,000 300,000

Property 2 3,050,000 2,850,000 (200,000)
Property 3 3,850,000 3,600,000 (250,000)

Net loss change an fair value (150,000)

Answer: B
Practical Accounting One by Conrado O. Uberta