Question
On January 1, 2016, an entity purchased 100 cows which are 3 years old for P15, 000 each for the purpose of producing milk for
On January 1, 2016, an entity purchased 100 cows which are 3 years old for P15, 000 each for the purpose of producing milk for the local community. On July 1, 2016, the cows give birth to 20 calves.
The active market provided the fair value less cost to sell of the biological assets as follows:
New born calf on July 1
4,000
New born calf on December 31
5,000
year old calf on December 31
7,000
3 years old calf on December 31
18,000
4 years old cow on December 31
24,000
Required:
(a) Prepare all indicated journal entries for 2016 necessary to record all the transactions relating to biological asset.
(b) Determine the price, physical change and total change in fair value.
(c) Determine the carrying amount of the biological asset on December 31, 2016 and indicate the financial statement presentation of the accounts related to the biological assets.
(a)
Biological Asset
1,500,000
Cash
1,500,000
To record the acquisition of 100 cows at P15, 000 each or a total of P1.5 million.
Biological Asset
80,000
Gain from change in fair value
80,000
To record birth of 20 calves with a fair value of P4,000 each or a total of P80,000
Biological Asset
960,000
Gain from change in fair value
960,000
To record the change in fair value of the cows and calves on December 31, 2016
Cows which are now 4 years old
1 040 000
2 540 000
20 000
300 000
600 000
80 000
1 580 000
140 000
40 000
2 400 000
Calves which are now 1'2 year old
1 040 000
2 540 000
20 000
300 000
600 000
80 000
1 580 000
140 000
40 000
2 400 000
Total fair value as at December 31
1 040 000
2 540 000
20 000
300 000
600 000
80 000
1 580 000
140 000
40 000
2 400 000
Carrying amount
1 040 000
2 540 000
20 000
300 000
600 000
80 000
1 580 000
140 000
40 000
2 400 000
Change in fair value
960,000
(b)
- Price Change
4 years old cows
1 040 000
2 540 000
20 000
300 000
600 000
80 000
1 580 000
140 000
40 000
2 400 000
year old calves
1 040 000
2 540 000
20 000
300 000
600 000
80 000
1 580 000
140 000
40 000
2 400 000
Total price change
320,000
- Physical Change
4 years old cows
1 040 000
2 540 000
20 000
300 000
600 000
80 000
1 580 000
140 000
40 000
2 400 000
year old calves
1 040 000
2 540 000
20 000
300 000
600 000
80 000
1 580 000
140 000
40 000
2 400 000
Newborn, at birth
1 040 000
2 540 000
20 000
300 000
600 000
80 000
1 580 000
140 000
40 000
2 400 000
Total physical change
720,000
Total change in fair value
1 040 000
2 540 000
20 000
300 000
600 000
80 000
1 580 000
140 000
40 000
2 400 000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Accounting What the Numbers Mean
Authors: David Marshall, Wayne McManus, Daniel Viele
12th edition
007802529X, 1259969525, 978-1260565492
