Question 1 - Biological Assets

In 2015, ABC Limited established and commenced operation of an Flower business in Suva. The trees were planted in 2007, and began producing saleable flowers in 2016.

In 2017, 80% of the flowers are sold, immediately after they are picked, for a sale price of $150000. Selling costs are assumed to be immaterial. The remaining 20% of the picked flowers are recognized as inventories at the end of the reporting period.

The fair value less the estimated point of sale costs of the flower trees at 30th June 2016 ( the end of the previous reporting period) was $95000 and at 30th June 2017, $115000. During the reporting period ending 30th June 2017, employee expenses, fertilizers, lease expense and other expenses amount to $50000. The fair value less estimated point of sale costs of the flowers immediately after picking and packing amount to $100000. Picking and packaging costs amount to $25000.

Required: Prepare the journal entries to record:

a) The cost incurred to maintain the biological assets; [2 marks]

b) The harvesting of the agricultural produce from the biological asset; [2 marks]

c) The sale of the agricultural produce and [ 3 marks]

d) The changes in the fair value of the biological assets between ends of the two reporting periods.