3.

Biological Assets (Breeding of Immature Biological Asset, the Selling of Matured Asset)

Clarence Company started its cattle farm on January 1, 2020, with 100 immature calves, and 50 mature stock
was acquired. The company's business is to breed the cattle and sell the matured cattle. Cattle become
mature after one year. The following information was given:

1/1/2020 12/31/2020 12/31/2021

Fair value per unit (immature) P20,000 P22,000 P23,500
Fair value per unit (mature) P60,000 P65,000 P66,500

Cost to sell per unit:

Auctioneer’s Fee P 5,000 P 5,250 P 5,500
Transportation 1,000 1,100 1,300

The following are the movements of the immature cattle:

1/1/2020 12/31/2020 12/31/2021

Beg. Balance - 100 60
Acquisition 100 50 40
New Born - 10 15
Transfer to Mature - 100 60
Sales - - -
Closing balance 100 60 55

The following are the movements of the mature cattle:

1/1/2020 12/31/2020 12/31/2021

Beg. Balance - 50 100
Acquisition 50 - -
New Born - - -
Transfer from immature - 100 60
Sales - 50 100
Closing balance 50 100 60

A. Changes in the Fair Value

Immature cattle 1/1/2020 12/31/2020 12/31/2021

Beginning balance - 1,400,000 939,000

Due to acquisition 20,000-5,000-1,000 = 14,000*100 1,400,000
22,000-5,250-1,100 = 15,650*50 782,500
23,000-5,500-1,300 = 16,700*40 668,000
Due to price change -
14,000-15,650 = 1,650*100 165,000
15,650-16,700 = 1,050*60 63,000
Due to newly born cattle -
15,650*10 156,500
 16,700*15 250,500
Due to physical change (transferred to mature) -
15,650*100 (1,565,000)
16,700*60 (1,002,000)
Total changes in the Fair value 1,400,000 (461,000) (20,500)

Balance, End of the year 1,400,000 939,000 918,500

B. Changes in the Fair Value

Mature cattle 1/1/2020 12/31/2020 12/31/2021

Beginning balance - 2,700,000 5,865,000

Due to acquisition 60,000-5,000-1,000 = 54,000*50 2,700,000 - -
Due to price change -
65,000-5,250-1,100 = 58,650
54,000 – 58,650 = 4,650*50 232,500
66,500 – 5,500 – 1,300 = 59,700
58,650 – 59,700 = 1,050*100 105,000
Due to newly born cattle - - -
Due to physical change (transferred from immature) -
58,650*100 5,865,000
59,700*60 3,582,000
Due to sales -
58,650*50 (2,932,500)
59,700*100 (5,970,000)
Total changes in the Fair value 2,700,000 3,165,000 (2,283,000)

Balance, End of the year 2,700,000 5,865,000 3,582,000

Journal Entries:

1/1/2020 Acquisition
Biological asset – immature 1,400,000
Biological asset – mature 2,700,000
Cash 4,100,000

12/31/2020
Newly acquired cattle
Biological asset – immature 782,500
Cash 782,500

Newly born cattle

Biological asset – immature 156,500
Unrealized Holding Gain 156,500

Price changed
 Biological asset – immature 165,000
Biological asset – mature 232,500
Unrealized Holding Gain 397,500

Physical change (immature to mature)

Biological asset – mature 5,865,000
Biological asset – immature 1,565,000
Unrealized Holding Gain 4,300,000

Cash xxx
Sales xxx

Cost of sales 2,932,500

Biological asset – mature 2,932,500

4. Biological Assets (Another Presentation of the Problem)

Keira Company has a herd of 10 2-year old biological assets on January 1, 2020. On June 30, 2020, five
biological assets aged 2.5 years were acquired. Also, on this date, one biological asset was born. The fair
value of the biological assets, less cost to sell, is as follows (per unit):

A 2-year old biological asset on January 1, 2020, P15,000

A 2.5-year old biological asset on June 30, 2020, 18,000
A newly born biological asset on June 30, 2020, 6,000
A 2-year old biological asset on December 31, 2020, 16,500
A 2.5-year old biological asset on December 31, 2020, 18,750
A newly born biological asset on December 31, 2020, 7,500
A 3-year old biological asset on December 31, 2020, 21,000
0.5-year-old biological asset on December 31, 2020, 8,000

Compute the fair value of the biological asset on December 31, 2020, and the unrealized holding gain
or loss due to changes in prices and physical change.

1/1/2020
Biological Asset 150,000
Cash 150,000
10*15,000

6/30/2020
Biological Asset 90,000
Cash 90,000
5*18,000

6/30/2020
Biological Asset 6,000
Unrealized Holding Gain 6,000
12/31/2020
Biological Asset 77,000
Unrealized Holding Gain 77,000

Price change
Same age – different dates (date of birth or acquisition and the date asked by the problem (December 31,
2020)

2 year old January 1, 2020 15,000

2 year old December 31, 2020 16,500
1,500*10 15,000

2.5 year old June 30, 2020 18,000

2.5 year old December 31, 2020 18,750
750*5 3,750

0 year old June 30, 2020 6,000

0 year old December 31, 2020 7,500
1,500*1 1,500
Total Price Change 20,250

Physical change
Same date (date asked by the problem) – different ages

December 31, 2020

3 year old 21,000
2 year old 16,500
4,500*10 45,000

December 31, 2020

3 year old 21,000
2.5 year old 18,750
2,250*5 11,250

December 31, 2020

0.5 year old 8,000
0 year old 7,500
500*1 500
Total physical change 56,750

Total changes in the FV (Price + Physical) 77,000