Question 1- Biological Assets-10 Marks

In 2015, ABC Limited established andcommenced 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

costsareassumedtobeimmaterial.Theremaining20%ofthepickedflowersarerecognizedas

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

previousreportingperiod)was$95000andat30thJune2017,$115000.Duringthereportingperiod

ending30thJune2017,employeeexpenses,fertilizers,leaseexpenseandotherexpensesamountto

$50000.

Thefair valuelessestimatedpointofsalecostsoftheflowersimmediatelyafterpickingandpacking

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.

[3 marks]