Question
Dayag farms is into cultivating agricultural lands. As of January 1, 2018, the company has a farm located in the province of Cagayan that consist
Dayag farms is into cultivating agricultural lands. As of January 1, 2018, the company has a farm located in the province of Cagayan that consist of two age group of bearer trees, 3-year old and 4-year old. The following are relevant information
Dec. 31 fair value January 1 fair value
Farm with 3-year old bearer tree P3,000,000 P2,400,000
Farm with a 4-year old bearer tree P4,200,000 P3,600,000
Farm with a 5-year old bearer tree, including the fruit they bear P6,380,000 P5,400,000
5-year old trees started to bear fruit during the last quarter of the year. As of December 31, 2018, only 5- year old trees bear fruits that are ready to be harvested. The estimated fair value less cost to sell for the fruits is P500,000. There was no change in the fair value of the contributory asset (land) as of December 31, 2018.
1) If the bearer plants are considered to have dual purpose, by what amount of the change in the fair value of the bearer plants that pertains to the physical transformation?
a. P1,000,000
b. P1,800,000
c. P1,680,000
d. P2,840,000
2) If the bearer plants are considered to have dual purpose, by what amount of the change in the fair value of the bearer plants that pertains to price during the year?
a. P800,000
b. P1,000,000
c. P1,680,000
d. Cannot be determined
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