ILLUSTRATIVE EXAMPLES

Biological Assets

1. Classification Standard Measurement

a. Sheep _______________ ___________ ___________

b. Wool _______________ ___________ ___________

c. Carpet _______________ ___________ ___________

d. Cattle _______________ ___________ ___________

e. Milk _______________ ___________ ___________

f. Cheese _______________ ___________ ___________

g. Sugarcane _______________ ___________ ___________

h. Harvested cane _______________ ___________ ___________

i. Sugar _______________ ___________ ___________

j. Apple trees _______________ ___________ ___________

k. Harvested apples _______________ ___________ ___________

l. Apple juice _______________ ___________ ___________

Requirement: Classify the above items accordingly and indicate the applicable accounting standard and
measurement principle.
2. On January 1, 2025, Pinnacle Company reported the following information:

Price in the principal market P20,000

Commissions to brokers 1,000
Transport costs 700
Levies by commodity exchange 300
Transfer taxes and duties 500
Advertising costs 200

Requirement: Compute for the following:

1. Fair value
2. Cost to sell
3. Fair value less cost to sell

3. On January 1, 2025, Mr. Accounting Company acquired a biological asset at its fair value of P10,000.
Necessary costs incurred on the purchased totaled P2,000. It was estimated that if the biological
asset is to be sold currently, costs to sell would amount to P500.

Requirement: Provide the journal entry to record the initial recognition.

4. On January 1, 2025, a dairy cattle of CPA Company gave birth to a calf. The fair value less cost to sell
of a newly born calf as of January 1, 2025 is P5,000. Costs incurred to induce procreation such as
costs of artificial insemination, costs of labor totaled P3,000.

Requirement: Provide the journal entry to record the initial recognition.

5. On April 1, 2025, BSA Company harvested ripe mangoes. The harvested mangoes have fair value less
cost to sell of P50,000 on April 1, 2025. Labor costs incurred in the harvest totaled P5,000.

Requirement: Provide the journal entry to record the initial recognition.

6. [Government grant related to biological asset] On January 1, 2025, the government granted Pinnacle
Company P500,000 cash aid in planting rice. Rice plants are considered “annual crops” and therefore
do not qualify as bearer plants. The grant requires Pinnacle to farm only within the city limits for five
years. If any of the conditions is breached, Pinnacle must return the grant taking into consideration
the portion retained based on passage of time.

Requirement: Compute for the following:

1. Income from government grant in 2025 assuming no breach of condition.
2. Total income from government grant earned over five years assuming no breach of condition.