BKAR2023 FINANCIAL ACCOUNTING AND REPORTING II (A232)

MINI CASE 5: BIOLOGICAL ASSETS

DUE DATE: 18 May 2024, 11.00 PM

Guidelines for submission:

1) Please answer all questions.

2) Please write your name, matric number, group on the header and page number on the
bottom of your answer document.

3) The mini case is an individual task; however, discussion is allowed, but copying other
student’s answer is forbidden.

4) Your answer should be handwritten and subsequently scanned with a scanner or

mobile scanner apps in a combined PDF file. The scanned document must be clear,
easily readable, and complete. Photo is not allowed.

5) Submit your scanned answer via Online Learning portal → within

the allotted time and period, before 11.00 p.m., 18 May 2024 (MYT). Only one
submission will be accepted.

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QUESTION 1
Kamsawit Bhd is an agriculture company that involves in Jamnapari goats breeding and oil palm
plantation. The company started business operation in January 2015. The company’s financial
year ends on 31 December every year.

The company owns 7-hectare of land planted with about 1,000 oil palm trees. Oil palm trees will
start bearing fruit after 30 months of field planting and continue to produce for the following 20
to 30 years. The accountant of the company believe that the oil palm trees should be treated as
the biological assets. Meanwhile, goat breeding has been carried out on 2-hectare of land. The
Jamnapari goat can be sold at the range of 6 to 24 months old. At the end of 2021, the company
had 1,400 of 10-month-old goats. The following information is related to the agricultural
activities incurred during financial year 2022:

Date Transaction
1 January 2022 Received an agriculture grant of RM50,000 from the federal
government. The grant is earned once the company is able to produce
more than 100 tan metrics of oil palm fruit.
3 February 2022 Sold 800, 11-month-old goats at RM3,100 per goat and incurred
RM22,000 of operating expense for goat breeding.
1 June 2022 Purchased 1,500, 3-month-old Jamnapari kids at the total price of
RM480,000.
31 October 2022 Sold 300, 8-month-old goats at RM2,900 per goat which were
purchased on 1 June 2022.

Additional information:

The fair value less costs to sell of goats is as follows:

Date Age Fair value (per unit)

31 December 2021 10-month-old RM1,200
31 December 2022 20-month-old and above RM4,300
10-month-old RM1,100

REQUIRED:
(Show all workings and round all numbers to the nearest RM)

(a) Discuss the accounting treatment for the agriculture grant awarded by the federal
government to Kamsawit Bhd on 1 January 2022.

(b) Prepare journal entries to record the Jamnapari goat breeding during the financial year
2022.

(c) Give your opinion on the treatment of the oil palm trees by the accountant of Kamsawit
Bhd in accordance with MFRS 141 Agriculture and provide your justification.

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QUESTION 2

MangoMoo Bhd is a company that carries out agriculture-related business. It has been running
cows farming and mango plantation in Selangor since 2017. The company planted mango trees
on 8-hectare of land. A mango tree bears fruits three years after it has been planted. It can live
up to and bear fruit for 40 years. Meanwhile, the company breeds cows near the plantation. The
cows give birth to calves when they reach two years old. It takes about 13 months for the calves
to be fully-grown adult cows. On 1 July 2021, the company breeds 70 cows of different ages.
The following information is related to the agricultural activities incurred during financial year
2022:

Date Transaction
5 September 2021 Sold 22 cows aged above 3 years old at RM5,700 per cow.

31 March 2022 Harvested 510 kilograms of mangos with an average fair value of
RM30 per kg. The cost incurred to sell the mangos is estimated to be
3% of the mango price.

1 April 2022 Sold 12 cows aged below 3 years old at RM4,100 per cow. The
company incurred RM35,000 of operating expense for livestock
farming.

2 May 2022 15 calves were borne and the fair value less costs to sell on this date is
RM920 per calf.

Additional information:

1. The fair value less costs to sell of cows and calves is as follows:

Quantity 1 July 2021 30 June 2022

(On 1 July 2021) (RM per (RM per
animal) animal)
Cows (above 3 years old) 40 5,500 6,000
Cows (below 3 years 20 4,000 4,200
old)
Calves (below 13 months 10 900 1,100
old)

2. The calves that the company had on 1 July 2021 were born in May 2021.

3. The company applies perpetual inventory system.

4. Financial year end for the company is 30 June each year.

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REQUIRED:
(Show all workings and round all numbers to the nearest RM)

(d) Prepare journal entries to record the cows farming during the financial year 2022.

(e) Prepare journal entries to record the mango plantation during the financial year 2022.

(f) Explain why biological assets shall be subsequently measured at fair value.

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QUESTION 3

Summer Rubber Estate Bhd (SREB) is a rubber estate company located in Sepang, Selangor. The
company has 20-hectare land acquired in year 2012 and planted with rubber trees. After seven
years, the rubber trees are mature and will produce latex for the next 20 years. The latex is sold
to rubber manufacturer for commercial processing. Once the rubber trees stop producing latex,
the trees will be cut down and sell as scrap.

In addition, SREB also involves in livestock farming and raises a herd of goats and kids near to
the plantation. On 30 June 2020, the company had 100 goats aged above 2 years old, 50 kids
aged 2 months old and 20 kids borne a week ago.

On 1 May 2021, the company managed to sell 20 goats aged above 2 years old at
RM950/unit and 10 kids aged 12 months old at RM500/unit. The operating expenses incurred for
livestock farming during the year was RM5,500. On 15 May 2021, the nannies gave birth to 10
kids.

Additional information:

1. The fair value of the goats and kids as at 30 June 2020 and 30 June 2021 are stated
below:

30 June 2020 30 June 2021

(per unit) (per unit)
Kid (below 13 months old) 450 530
Goat (above 2 years old) 900 995
Goat (below 2 years old) 750 815

2. The kid becomes a goat at the age of 13 months old and female goat (nanny) gives birth
to the kid when it reaches the age of 15 months old. The company usually sells the goats
in the principal market at the age of 15 months old, whereas the kids could be sold when
they turn into 7 months old.

3. Financial year end for the company is 30 June each year.

REQUIRED:

(a) Identify the type of assets and explain its measurement basis for the following items:

(i) Mature rubber trees

(ii) Latex
(iii) Goat

(b) Prepare all related journal entries for livestock farming for the year ended 30 June 2021.

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(c) Discuss the disclosure requirements for fair value of biological assets that previously
measured at cost less any accumulated depreciation and any accumulated impairment
losses becomes reliably measurable during the current period.