LAGRIMAS, SARAH NICOLE S.

BSMA 2-7

Assessment/Activities:

1. The following information pertains to Robina Farms’ biological assets:

A group of thirty 2-year old swine was held on January 1, 2021. Five one
year old swine were purchased on January 2, 2021 for P10,000 each and ten
were born also on January 2, 2021. Five 3-year old swine were sold at the
end of the year 2021. The fair value less cost to sell of each were as follows:
FV less cost to FV less cost to
Age sell January sell December
1,2021 31,2021
Newborn P4,000 P5,000
1 year old 6,000 6,500
2 years 8,500 11,600
3 years 11,200 16,500

Required:
a. Prepare the entries to record transactions relating to the company’s
biological assets for the year 2021.

Journal entries for Biological Asset

Jan 2, Biological Asset 30,000
2021
Loss arising on initial recognition of 20,000
bio-asset
Cash 50,000
To record biological asset
purchased

Jan 2, Biological Asset 40,000

2021
Gain from increase in FV due to birth 40,000
To record an increase in FV due to
birth

Dec 31, Biological Asset 293,000

2021
Gain from increase in FV due to price 105,500
change
Gain from increase in FV due to physical 187,500
change
To record an increase in FV due to price and physical change
Dec 31, Cash 82,500
2021
Biological Assets 82,500
To record sale of biological asset
b.Show computations for the following:

1 Gain/loss on the initial recognition of biological assets upon purchase.

Purchase Price (10,000*5 pigs) P50,000
FV less cost to sell on Jan. 1 (6,000*5) 30,000
Loss on initial recognition upon purchase
P20,000

2 Gain/loss on change in fair value due to physical change.

Age Ag Dec 31 Price Differenc Quantity Amount
e on Dec e in
on 31, Price
De curren
c t
31 age
2 years old 3 yo 11,600 16,500 4,900 30 P147,000
1 year old 2 yo 6,500 11,600 5,100 5 25,500
Newborn 1 yo 5,000 6,500 1,500 10 15,000
Change in FV due to physical change P187,000

3. Gain/loss on change in fair value due to price change.

Age Dec 31 Jan 1 Difference Quantity Amount
in
Price
2 years 11,600 8,500 3,100 30 93,000
old
1 year 6,500 6,000 500 5 2,500
old
Newbor 5,500 4,000 1,000 10 10,000
n
Change in FV due to price change P105,500

4. Total amount of biological assets that will be shown in the

December 31,2021 financial statements.

Jan 1 Balance (30*8,500) P255,000

Add/less: transactions
Jan 2 Biological Asset purchased 30,000
Jan 2 Newborn 40,000
Dec 31 Increase in FV due to price change 105,500
Dec 31 Increase in FV due to physical change 187,000
Dec 31 Sold (5*16,500) (82,500)
Biological Asset on December 31, 2021 P535,000
2. A group of thirty 2- year old pigs was held by Madrigal Farms at January 1,
2021. Five one-year old pigs were purchased on January 5, 2021 for P8,000
each and ten were born on the same date. Five 3-year old pigs were
disposed of at the end of the year. Per unit fair values less cost to sell were
as follows:

Age January 1 December

31
3 years P15,000 P16,500
2 years 11,200 11,600
1 year 8,500 8,800
Newborn 6,000 6,500

The company discloses separately the increase in fair value less cost to sell
due to physical change and change in fair value less cost to sell due to
price change.

1. How much is the gain or loss on the initial recognition of biological

assets upon purchased of five pigs on January 5, 2021?
a. P2,500 gain b. 2,500 loss c. 4,000 gain d. 4,000
loss

Computation:
Purchase Price (8,000*5 pigs) P40,000
FV less cost to sell on Jan. 1 (8,500*5) 42,500
Gain on initial recognition upon P2,500
purchase

Biological Asset 42,500

Cash 40,000
Gain on initial recognition 2,500
Purchased biological assets at less than
fair value

2.How much is the gain arising from change in fair value due to physical
change?
a. P184,000 b. 244,000 c. 455,000 d. 545,000

Computation:
Age Ag Dec 31 Price on Differenc Quantity Amount
e Dec 31, e in
on current Price
De age
 c
31
2 years 3 yo 11,60 16,500 4,900 30 P147,00
old 0 0
1 year old 2 yo 8,800 11,600 2,800 5 14,000
Newborn 1 yo 6,500 8,800 2,300 10 23,000
Change in FV due to physical change P184,00
0
3.How much is the gain arising from change in fair value due to price
change?
a. P16,000 b. 16,500 c. 18,500 d. 50,000

Computation:
Age Dec 31 Jan 1 Difference Quantity Amount
in
Price
2 years 11,600 11,200 400 30 12,000
old
1 year old 8,800 8,500 300 5 1,500
Newborn 6,500 6,000 500 10 5,000
Change in FV due to price change P18,500

4. What amount shall be presented as biological assets by Madrigal

Farms on December 31, 2021?
a. P516,000 b. 558,000 c. 558,500 d. 641,000

Computation:
Jan 1 Balance (30*11,200) P336,000
Add/less: transactions
Jan 5 Biological Asset purchased 42,500
Jan 5 Newborn 60,000
Dec 31 Increase in FV due to price change 18,500
Dec 31 Increase in FV due to physical change 184,000
Dec 31 Sold (5*16,500) (82,500)
Biological Asset on December 31, 2021 P558,500

Journal entries for Biological Asset

Jan 5, Biological Asset 42,500

2021
Cash 42,500
To record biological assets purchased

Jan 5, Biological Asset 60,000

2021
Gain from increase in FV due to birth 60,000
To record an increase in FV due to
birth
Dec 31, Biological Asset 202,500
2021
Gain from increase in FV due to price 18,500
change
Gain from increase in FV due to physical 184,000
change
To record an increase in FV due to price and physical change
Dec 31, Cash 82,500
2021
Biological Assets 82,500
To record sale of biological asset