ACCOUNTING 106 MR. ALLAN LEO T.

PARAN, CPA

ASSIGNMENT NO. 4.1 - BIOLOGICAL ASSETS

Problem 1

The following pertains to the biological assets owned by Animal Farms, Inc.:

Carrying amount at January 1, 2019 4,597,500

Purchases 262,500
Gain arising from changes in fair value less cost to sell
attributable to physical changes 153,580
Gain arising from changes in fair value less cost to sell
attributable to price changes 245,810

Fair value of agricultural produce at time of harvest 270,000

Commission to brokers and dealers relating to agricultural 20,000
produce
Levies by regulatory agencies and commodity exchanges
related to agricultural produce 55,000
Transfer taxes and duties related to agricultural produce 27,000
Transport and other costs necessary to get assets to a market
related to agricultural produce 10,000

Decrease in fair value of biological asset due to harvest 180,000

Sales of biological asset at FV 360,000

Questions (Show your solutions in good form):

1. Prepare journal entries to record the above transactions.

2. How much is the biological assets to be reported in the December 31, 2019?
3. How much is the carrying amount of the agricultural produce to be reported at harvest
date?
4. How much is the aggregate amount of gain or loss from change in fair value of biological
asset?
Problem 2

Farmland Company produces milk on its farms. The entity produces 20% of the community 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 of milk
in powder.

On December 31, 2019, the biological assets are:

Purchased before January 1, 2019 (3 yrs old) 2,100 cows

Purchased on January 1, 2019 (2 yrs old) 300 heifers
Purchased on July 1, 2019 (1.5 yrs old) 750 heifers

No animals were born or sold during the year. The fair value less costs to sell are as follows:

January 1, 2019 Amounts in Pesos

1 year old 30,000
2 year old 40,000

July 1, 2019
1 year old 30,000

December 31, 2019

1 year old 32,000
2 year old 45,000
1.5 year old 36,000
3 year old 50,000

Questions (show your solutions in good form)

1. Prepare a reconciliation of biological assets and their carrying values for the year 2019.
Separate the mature biological assets (cows) from the immature biological assets
(heifers)
2. What is the value assigned to the biological assets on January 1, 2019?
3. What is the value of biological assets purchased on July 1, 2019?
4. What is the value assigned to the biological assets on December 31, 2019?
5. How much is the increase in the fair value of biological assets due to price change?
6. How much is the increase in the fair value of biological assets due to physical change?
7. What accounting standard would apply in measuring the value of the 50,000 milk in
powder on December 31, 2019?