Crown Cannabis Inc. (CCI) is a licensed grower that produces cannabis. CCI produces four varieties of cannabis, and each variety requires eight to 12 weeks from seed to maturity, with an average of 10 weeks. Cannabis plants produce only one crop, after which they are destroyed. CCI started operations in 2020 with two growing facilities, and it plans to expand in the future.

Each growing facility has 200 plants at all times, with each plant producing an average of 1.2 pounds. When one crop has been harvested, the next crop is immediately planted. Although it is possible to save seeds from CCIs cannabis plants to replant, it is less expensive to purchase seeds in bulk from a seed producer. Once the cannabis flowers have been harvested, they are dried, packaged, and sold to the British Columbia government. The selling prices are fixed for each variety and are not negotiable. Prices for 2020 are set at an average of $625 per pound for CCIs four varieties.

CCI does not regularly sell immature cannabis plants, but there is a market for these plants at an average of $200 per plant. CCI made one sale of all the 200 immature plants at both facilities in early 2020, which cost $55 per plant to ship.

At the end of 2020, CCI had a total of 330 pounds of dried cannabis on hand.

During the year ended December 31, 2020, CCI incurred the following costs of production:

• materials costs of $15 per plant
• labour costs of $75 per plant
• contracted security costs of $270,000
• dried cannabis packing and shipping costs of $90 per pound

CCI has a December 31 year end and reports under IFRS. CCI has not recorded any journal entries for the cannabis plants and dried cannabis at December 31, 2020.

Required:

1. Describe how the cannabis plants and dried cannabis should be recognized in the financial statements of CCI. Use the IAR approach for your response.

2. How would the cannabis plants and dried cannabis be initially measured?

3. Prepare the journal entries for the initial measurement of the cannabis plants and dried cannabis.