ACCOUNTING FOR BIOLOGICAL ASSETS:

BIOLOGICAL ASSETS IS TO BE REPORTED AT FAIR VALUE LESS COST TO SELL

ILLUSTRATION:

ROMANTIC BABOY COMPANY HAS THE FF. INFORMATION FOR THE YEAR 2019, RELATING TO ITS
BIOLOGICAL ASSETS.

20, 2 YEAR- OLD COWS WAS HELD ON JANUARY 1, 2019.

5, AGED 2.5 YEARS OLD WERE PURCHASED ON JULY 1, 2019.
ALSO, ON JULY 1, 2019, 4 COWS WERE BORN
10, COWS AGED 3 YEARS OLD WERE SOLD AT DECEMBER 31, 2019, AT FAIR VALUE.

THE FAIR VALUE LESS COST TO SELL WERE AS FOLLOWS:

JANUARY 1, DECEMBER
2019 JULY 1, 2019 31, 2019
2 YEAR OLD COW P15,000 P16,500
NEWBORN COW P8,000 8,500
0.5 YR. OLD 9,500
2.5 YR. OLD COW 20,000 23,000
3 YEAR OLD COW 28,000

ENTRIES FOR THE YEAR 2019 RELATING TO:

a. July 1, 2019- To record the purchase of of 5 cows. Aged 2.5 yrs.
BIOLOGICAL ASSETS ( 5 cows x P20,000 fair value) 100,000
CASH 100,000

b. July 1, 2019- To record the birth of 4 cows

BIOLOGICAL ASSETS (4 X P8,000) 32,000
INCOME- change in fair value due to birth. 32,000

d. CASH ( 10 cows x P28,000 fair value) 280,000

BIOLOGICAL ASSETS 280,000
To record sale of 10 cows which is 3 years of age.

e. December 31, 2019- Entry to record the increase in fair value due to price
change and physical change.
BIOLOGAICAL ASSETS 306,000
INCOME- Change in FAIR VALUE due to price change 47,000
INCOME- Change in FAIR VALUE due to physical change 259,000
To record increase in fair value of biological assets due to price
change and physical change.