Vallejos Acctg 301 Biological Assets Answer Key

CHAPTER 19 BIOLOGICAL ASSETS (Questionnaire with answers) 1. GOAT Company provided the following assets in a forest plantation and farm: Freestanding trees 5,000,000 Land under trees 600,000 Roads in forests 300,000 Animals related to recreational activities 1,000,000 Bearer plants 1,500,000 Bearer animals 2,000,000 What total amount of the assets should be classified as biological assets? a. 7,000,000 b. 8,500,000 c. 5,000,000 d. 8,000,000 Solution: Freestanding trees 5,000,000 Bearer animals 2,000,000 Biological assets 7,000,000 CHIKEN Company provided the following data: Value of biological asset at acquisition cot on December 31, 2018 Fair value valuation surplus on initial recognition at fair Value on December 31, 2018 Change in fair value to December 31, 2019 due to Growth and price fluctuation Decrease in fair value due to harvest in 2019

600,000 700,000 100,000 90,000

2. What is the carrying amount of the biological assets on December 31, 2019? a. 1,400,000 b. 1,490,000 c. 1,310,000 d. 1,300,000 3. What is the gain from change in fair value of biological asset that should be reported in the 2019 income statement? a. 100,000 b. 10,000 c. 710,000 d. 800,000 Solution: Question no. 2 Acquisition cost – December 31, 2018 600,000 Increase in fair value on initial recognition 700,000 Change in fair value in 2019 100,000 Decrease in fair value due to harvest (90,000) Carrying amount – December 31, 2019 1,310,000 Question no. 3 Change in fair value in 2019 100,000 Decrease in fair value due to harvest in 2019 (90,000) Net gain from change in fair value in 2019 10,000

4. SHEEP Company is engaged in raising dairy livestock. The entity provided the following information during the current year: Carrying amount on January 1 5,000,000 Increase due to purchases 2,000,000 Gain arising from change in fair value less cost of disposal Attributable to price change 400,000 Gain arising from change in fair value less cost of disposal 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. 7,150,000 b. 6,950,000 c. 6,000,000 d. 8,000,000 Solution: Carrying amount – January 1 5,000,000 Increase due to purchases 2,000,000 Gain from change in fair value due to price change 400,000 Gain from change in fair value due to physical change 600,000 Decrease due to sales (850,000) Decrease due to harvest (200,000) Carrying amount – December 31 6,950,000 COW Company produced mild for sale to local and national 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 during the year but not yet sold 400,000 5. What amount of gain on change in fair value should be recognized for biological asset in the current year? a. 2,250,000 b. 2,500,000 c. 2,650,000 d. 2,900,000 6. 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. 0 d. 150,000 Solution: Question no. 5 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 Question no. 6 Inventory 400,000 Gain on agricultural produce 400,000

HONEY Company has a herd of 10 2-year old animals on January 1, 2019. One animal aged 2.5 years was purchased on July 1, 2019 for 108, and one animal was born on July 1, 2019. No animals were sold or disposed of during the year. The fair value less cost of disposal per unit is as follows: 2 – year old animal on January 1 100 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 New born animal on December 31 72 3 – year old animal on December 31 120 0.5 – year old animal on December 31 80 7. What is the fair value of the biological assets on December 31? a. 1,320 b. 1,400 c. 1,440 d. 1,360 8. What amount of gain from change in fair value of biological assets should be recognized in the current year? a. 222 b. 332 c. 292 d. 300 9. What is the gain from change in fair value due to price change? a. 292 b. 222 c. 237 d. 55 Solution: Question no. 7 Fair value of 3 – year old animal on December 31 (11 x 120) 1,320 Fair value of 0.5 – year old animal on December 31 The new born (1 x 80) 80 Total fair value – December 31 1,400 Question no. 8 Fair value of 10 animals on January 1 (10 x 100) 1,000 Acquisition cost of one animal on July 1 108 Total carrying amount of biological assets – December 31 1,108 Fair value on December 31 1,400 Carrying amount 1,108 Gain from change in fair value 292 Question no. 9 Gain from change in fair value due to price change: 10 2 – year old animals (105 – 100 = 5 x 10) 50 1 2.5 – year old animal (111 – 108 = 3 x 1) 3 1 new born on July 1 (72 – 70 = 2 x 1) 2 Total 55

10. DOG 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, 2018, the entity has harvested coffee beans costing 3,000,000 and with fair value less cost of disposal of 3,500,000 at point of harvest. Because of long aging and maturation process after harvest, the harvested coffee beans were still on hand on December 31, 2019. On such date, the fair value less cost of disposal is 3,900,000 and the net realizable value is 3,200,000. What is the measurement of the coffee beans inventory on December 31, 2017? a. 3,000,000 b. 3,500,000 c. 3,200,000 d. 3,900,000 Explanation: Fair value measurement stops at the point of harvest and PAS 2 on inventory applies after such date. The net realizable value of 3,200,000 is the measurement on December 31, 2019 because this is lower than the deemed cost of 3,500,000.