PROBLEM 1:

The following information are based on the biological assets of HYPNOSHROOM

CORP. The following costs were incurred from January 1, 2021 being the time the

biological assets were cultivated up to the time of initial commercial harvest being

December 31, 2025:

Direct labor costs (50% incurred in 2021, 20% incurred in 2022

and 10% each incurred in 2023, 2024 and 2025) Php

700,000

Cost of seedlings (incurred in 2021) 60,000

Cost of fertilizers and chemicals (incurred during 2021 and 2022) 40,000

Depreciation of farm equipment, bunkhouses (incurred evenly) 100,000

Utilities (incurred evenly) 50,000

Other plantation overheads (incurred evenly) 250,000

Total Php 1,200,000

As of December 31, 2026, the estimated fair value of the combined assets (bearer

plants and the fruits they bear) is Php 3,000,000. The estimated fair value of the fruits

bearing on the plants is Php 400,000. The estimated costs to sell are Php 100,000

and Php 20,000 for the plants and the fruits respectively.

Required: Answer the following questions:

a. If the plants are considered as bearer plant with singular purpose, with an

estimated life of ten years and with estimated salvage value of Php 20,000,

using cost model, what amount should be charged against income during

2026 in relation to the bearer plants?

b. If the plants are considered as bearer plants with dual purpose, what amount

should be recognized as an expense in 2025 in relation to bearer plants?

c. If the plants are considered as bearer plants with dual purpose, what amount

should the bearer plant be reported in the statement of financial position for

the year ended December 31, 2026?

d. If the plants are considered as bearer plant with singular purpose, what

amount of agricultural produce should the company report in the 2026

statement of financial position?