Problem Set – Agriculture CPAs by October 2020

Problem # 1

Sheep 400,000 Wool 160,000

Felled Trees 2,680,000 Tea 38,200
Harvested Cane 1,160,000 Cotton 1,360,000
Coconut Trees 4,800,000 Plants 1,400,000
Dairy Cattle 4,000,000 Thread 80,000
Cigarette -Marlboro 41,000 Carrots to be harvested next week 200,000
Sausages 20,000 Low Fat Milk 520,000
Cured Hams 36,000 Wine 6,000,000
Pig Carcass 230,000 Picked Fruit 49,400
Fruit Pickles 120,000 Frozen Lechon 120,000
Trees in Plantation Forest 12,000,000 Mango Tree with Ripe Mango 1,400,000
Harvested Cabbage 40,000 GuardDogs 300,000
Carpet 260,000 Animals in Zoo 24,000,000
Grape Vines 1,500,000 Dinasour Statue in Zoo 1,000,000
Picked Grape Fruit 180,000 Tomato Vines with ripe fruit 500,000
Strawberry Plants 1,500,000

Question:
1. How much is classified as
- Biological Asset
- Agricultural Produce
- Inventory
- PPE
Solution:

Biological Asset Agricultural Produce Inventory PPE

Sheep 400000 Felled Trees 2,680,000 Cigarette 41,000
Dairy Cattle 4,000,000 Harvested Cane 1,160,000 Sausages 20,000 Coconut Trees 4,800,000
Trees in Plantation
12,000,000
Forest Pig Carcass 230,000 Cured Hams 36,000 Animals in Zoo 24,000,000
Mango Tree with1,400,000
Ripe Mango Harvested Cabbage 40,000 Fruit Pickles 120,000 Tomato Vines with ripe
500,000
fruit
Plants 1,400,000 Picked Grapes 180,000 Carpet 260,000 Strawberry Plants 1,500,000
Wool 160,000 Tea 38,200 Dinasour Statue in1,000,000
Zoo
Cotton 1,360,000 Thread 80,000 Grape Vines 1,500,000
19,200,000 Carrots to be harvested
200,000
next weekLow Fat Milk 520,000 Mango Tree with Ripe
1,400,000
Mango
Picked Fruit 49,400 Wine 6,000,000 34,700,000
6,059,400 Frozen Lechon (Cebu)
120,000
7,235,200

Problem # 2

Legend Dairy produced milk for local ice cream producers. The entity began operations at the beginning of
current year by purchasing milking cows for ₱2,000,000.

The entity provided the following information at year-end relating to the milking cows:

Carrying amount – January 1 2,000,000

Change in fair value due to growth and price 400,000
change
Decrease in fair value due to harvest 50,000
Problem Set – Agriculture CPAs by October 2020
Newborn calf at year-end at fair value 200,000
Milk harvested during the year but not yet sold 250,000
1. What amount of net gain on biological asset should be reported in the current year?

2. What amount of gain on agricultural produce should be recognized in the current year?

3. What is carrying amount of biological asset at year-end?

Solution

1. Change in fair value due to growth and price 400,000

change
Decrease in fair value due to harvest (50,000)
Newborn calf at year-end at fair value 200,000
Total 550,000

2. 250,000

3. Carrying amount of biological asset (2,000,000 + 550,000) 2,550,000

Probelem # 3

BIOLOGICAL ASSETS – AGRICULTURAL PRODUCE

A public limited company, Mabini Dairy Products, produces milk on its farms. As of January 1, 2010 Mabini has a
stock of 1,050 Cows (average age, 2 years old) and 150 heifers (average age, 1 year old).

Additional information:

- Mabini purchased 375 heifers, average age 1 year, on July 1, 2010. No animals were born or sold during the year.

-The Company produced milk with a fair value of P660 000 (that is determined at the time of milking) in the year ended
31 December 2010. The Company also estimated the following costs:

Commissions to brokers and dealers 20,000

Transport and other costs necessary to get milk to a market 10.000

- The company has had problems during the year. Contaminated milk was sold to customers. As a result, milk
consumption has gone down. The government decided to compensate farmers for potential loss in revenue from sale of
milk. This fact was published in the national press on December 1, 2010. Mabini received an official letter on December
10, 2010, stating that P100,000 wouldbe paid to it an April 3, 2011

- The company's business is spread over different parts of the country. The only region affected by the contamination
was Region X, where the government curtailed milk production in the region. The cattle were unaffected by the
contamination and were healthy. The company estimates that the future discounted cash flow income from the cattle in
Region X amounted to P2 million, after taking into account the government restriction order. The company feels that it
cannot measure the fair value of the cows in the region because of the problems created by the contamination. There
are 300 cows and 100 heifers in the region. All these animals had been purchased before January 1, 2010. A rival
company had offered Mabini P1.5 million for these animals after costs to sell and further offered P3 million for the farms
themselves in that region. Mabini has no intention of selling the farms at present.
Problem Set – Agriculture CPAs by October 2020
The fair values less cost to sell were:

1 - year old animal at December 31 2010 P3,200

2-year old animal at December 31, 2010 4,500
1.5 - year old animal at December 31, 2010 3,600
3 year old animal at December 31, 2010 5,000
1 year old animal at January 2010 and July 1, 2010 3,000
2 year old animal at January 1, 2010 4,000

1. The milk should be valued at __________________

2. The increase in value of biological assets in 2010 due to price change is _______________

3. The increase in value of biological assets in 2010 due to physical change is _____________

4. The carrying amount of the biological assets as of January 1, 2010 is __________________

5. The carrying amount of the biological assets as of December 31, 2010 is _______________

Solution:

Question 1:
Fair value P 660, 000
Commissions to brokers and dealers ____(20,000)
Valuation of milk P 640,000

Question 2:
Cows [(1,050*(4,500-4,000)] P 525,000
Heifers, 1/1/10 [150* (3,200-3,000)] 30, 000
Heifers, 7/1/10 [375*(3,200-3,000)] 75, 000
Problem # 4 Increase in value of biological assets due to P 630, 000
price change
At the beginning of the current
year, Maezhy Question 3 Company had a
herd of 10 2-year Cows [(1,050*(5, 000-4,500)] P 525, 000 old animals.
Heifers, 1/1/10 [150* (4,500-3,200)] 195, 000
One animal aged 2.5 years was
Heifers, 7/1/10 [375*(3,600-3,200)] 150, 000
purchased on July 1 for 108,
Increase in value of biological assets due to P 870, 000
and one animal was born on July
1. physical change
Question 4
No animals were Cows (1,050*P4,000) P 4, 200, 000 sold or disposed
of during the Heifers, 1/1/10 (150*P3,000) 450, 000 year.
Carrying Amount, 1/1/10 P 4, 650, 000
Fair Value less cost of disposal per unit
2 – year old animal on January5 1
Question 100
2.5 – year old animalCows
on July 1
(1,050 * P5, 000) 108 P 5, 250, 000
New born animal on July
Heifers, 1/1/10 (150* P4, 500)70
1 675, 000
2 – year old animal on December
Heifers, 7/1/1031(375* P3, 600)105 1, 350, 000
Carrying Amount, 12/31/10 P 7, 275, 000
Problem Set – Agriculture CPAs by October 2020
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

1. What is the Fair Value of the Biological Assets on December 31?

2. What amount of gain from change in fair value of biological asserts should be recognized in the current
year?
3. What is the total gain from change in fair value?
Solution:

Question 1

Fair Value of 3 – year old animals on December 31 1,320

(11 x 120 )

Fair Value of 0.5 – year old animal on December 31, 80

the new born ( 1 x 80 )
Total Fair Value – December 31 1,400

Question 2

Fair Value of 10 animals on January 1 (10x 100) 1,000

Acquisition Cost of one animal on July 1 108
Total carrying amount of BA- December 31 1,108

Fair Value on December 31 1,400

Carrying Amount 1,108
Gain from change in fair value 292

Question 3

Gain from change in fair value due to price

change:
10 2 – year old (105-100 = 5 x 10) 50
1 2.5 – year old (111-108 = 3 x 1) 3
1 new born on July 1 (72-70 = 2 x 1) 2
TOTAL 55

Gain from change in fair value due to

physical change:

10 3 – year old animals acquired January 1 150

(120-105 = 15 x 10)
1 3 – year old animal acquired July 1 (120- 9
111 = 9 x 1)
Problem Set – Agriculture CPAs by October 2020
1 0.5 year old born on July 1 ( 80-72 = 8 x 1) 8
1 newborn (70x 1) 70
TOTAL 237

Price Change 55
Physical Change 237
Total Gain from change in fair value 292