8.

AUDIT OF BIOLOGICAL ASSETS AND AGRICULTURAL PRODUCE

DRILLS
Drill 1 (12 marks)
1. B (3 marks- see supporting computation)
2. A (3 marks- see supporting computation)
3. D (3 marks- see supporting computation)
4. B (3 marks- see supporting computation)

Biological Agricultural
PPE Inventory
Assets Produce
Sheep P500,000
Rubber products P10,000
Trees in a timber plantation 95,000
Maize plants 40,000
Lumber 62,000
Pigs 200,000
Roasted peanuts 20,000
Cotton plants 10,000
Peanut plants 5,000
Sugarcane 25,000
Tobacco plants 45,000
Tea bushes P800,000
Dairy cattle 1,000,000
Fruit trees 600,000
Tea 43,000
Rubber trees 300,000
Yarn 22,000
Carpet 33,000
Logs 45,000
Wheat plants 60,000
Cheese 75,000
Sausages 88,000
Wool P6,000
Thread 3,000
Felled trees 8,000
Clothing 150,000
Milk 9,000
Carcass 7,000
Sugar 67,000
Harvested cotton 13,000
Harvested peanuts 140,000
Harvested cane 22,000
Picked leaves 3,000
Oil palms 300,000
Picked grapes 2,000
Picked fruit 10,000
Grape vines 2,000,000
Harvested latex 10,000
Cured tobacco 320,000
Wine 500,000
Processed fruit 20,000
Palm oil 50,000
Bean plants 20,000
Cured hams 92,000
TOTALS P2,000,000 P4,000,000 P230,000 P1,600,000
1. B 2. A 3. D 4. B

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Drill 2 (3 marks)
Price of livestock in the farm (Fair Value) P5,300,000
Less: Estimated brokers’ commission (Cost to Sell) (120,000)
Biological Assets, 12/31/21 P5,180,000 3 marks

IAS 41, par. 12

A biological shall be measured on initial recognition and at the end of each reporting period at its
fair value less costs to sell.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
Costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding
finance costs and income taxes.

Drill 3 (9 marks)
Property,
Biological
plant and Inventories
Assets Assets (IAS
equipment (IAS 2)
41)
(IAS 16)
Mango trees P6,500,000
Mango fruits (attached) P1,500,000
Mango fruits (harvested) P1,900,000
Dried mangoes 2,800,000
Mango puree 1,000,000
Land 3,000,000
Road 1,500,000
Plant 2,400,000
Total P1,500,000 P13,400,000 P5,700,000
1. 2. 3.
3 marks 3 marks 3 marks

IAS 41
A biological asset is a living animal or plant.

A bearer plant is a living plant that:

a. is used in the production or supply of agricultural produce;
b. is expected to bear produce for more than one period; and
c. has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.

Classification of Biological Assets:

1. Consumable biological assets are those that are to be harvested as agricultural produce or sold
as biological assets. Examples of consumable biological assets are livestock intended for the
production of meat, livestock held for sale, fish in farms, crops such as maize and wheat,
produce on a bearer plant and trees being grown for lumber.

2. Bearer biological assets are those other than consumable biological assets; for example,
livestock from which milk is produced and fruit trees from which fruit is harvested. Bearer
biological assets are not agricultural produce but, rather, are held to bear produce.

IAS 2
Inventories are assets:
a. held for sale in the ordinary course of business;
b. in the process of production for such sale; or
c. in the form of materials or supplies to be consumed in the production process or in the rendering
of services.

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Drill 4 (12 marks)
Requirement 1:
a. P80,000 (3 marks- see supporting computation*)
b. P30,000 (3 marks- see supporting computation**)

Price Physical
Assets
Change Change
2 y.o. on 1/1- P12,000
2 y.o. on 12/31- P13,000 P1,000 x 25
3 y.o. on 12/31- P15,000 P2,000 x 25
Newborn on 1/1- P4,000 P4,000 x 5
Newborn on 12/31- P5,000 P1,000 x 5
1 y.o. on 12/31- P7,000 2,000 x 5
Total P30,000** P80,000*
b. a.

Requirement 2:
25 3 y.o. on 12/31 (P15,000 x 25) P375,000
5 1 y.o. on 12/31 (P7,000 x 5) 35,000
Biological Assets, 12/31/21 P410,000 3 marks

Requirement 3:
Note: The selling price is equal to the fair value less cost to sell of the asset by Dec. 31, 2021.
Actually, the question here is the total income to be reported in the statement in profit or loss.
So that would be total change in fair value. In this problem, the changes in fair value is due to
price and physical change which are P80,000 and P30,000 respectively. So in total, P110,000 (3
marks) - which is the gross income for the year.

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