Biological Assets Handouts

ARTS CPA Review
(Academic Review and Training School, Inc.)

2F & 3F Crème Bldg., Abella St., Naga City
Tel No.: (054) 472-9104; E-mail: [email protected].
BIOLOGICAL ASSETS (PAS 41)

PRACTICAL ACCOUNTING I MICHAEL B. BONGALONTA,CPA,MICB,MBA
PRESENTATION AND VALUATION– SAMPLE PROBLEMS
PROBLEM 1(adapted): Forester Company on adoption of PAS 41 reclassified certain assets as

biological assets. The total value of the forest assets is P6,000,000 which comprises:
Freestanding trees 5,100,000

Land under trees 600,000
Roads in forests 300,000
6,000,000
In Forester Company's statement of financial position, how much of the forest assets shall be
classified as biological assets?
a. 5,100,000 c. 5,400,000
b. 5,700,000 d. 6,000,000
PROBLEM 2 (adapted): Colombia Company is a producer of coffee. The entity is considering the
valuation of its harvested coffee beans. Industry practice is to value the coffee beans at market
value and users as reference a local publication “Accounting for Successful Farms.” On December
31, 2009, the entity has harvested coffee beans costing P3,000,000 and with fair value less cost
to sell of P3,500,000 at the point harvest. Because if long aging and maturation process after
harvest, the harvested coffee beans were still on hand on December 31, 2010. On such date, the
fair value less cost to sell is P3, 900,000 and the net realizable value is P3,200,000. The coffee
beans inventory shall be measured at:
a. 3,200,000 c. 3,000,000
b. 3,500,000 d. 3,900,000
PROBLEM 3 (adapted): Joan Company provided the following data:
Value of biological asset at acquisition cost on December 31 600,000

Fair valuation surplus on initial recognition at fair value on December 31, 2009 700,000
Change in fair value to December 31, 2010 due to growth and price fluctuation 100,000
Decrease in fair value due to harvest 90,000
What is the carrying amount of the biological asset on December 32, 2010?
a. 1,400,000 c. 1,300,000
b. 1,310,000 d. 1,490,000
PROBLEM 4 (adapted): Farmland Company produces milk on its farms. The entity produces
20% of the community's milk that is consumed. Farmland Company owns 5 farms and had a stock
of 2,100 cows and 1,050 heifers.
The farms produce 800,000 kilograms of milk a year and the average inventory held is 15,000
kilograms of mlik. However, on December 31, 2009, the entity is currently holding 50,000
kilograms of milk in powder. On December 31, 2009, the herds are:
Purchased in or before January 1, 2009 cows(3 years old) 2,100
Purchased on January 1, 2009 (2 years old) 300 heifers
Purchased on July 1, 2009 heifers(1.5 years old) 750
No animals were born or sold during the current year. The unit fair value less cost to sell is as
follows:
December 31, 2009:

1-year old 320
2-year old 4,500
1.5-year old 3,600
3-year old 5,000
July 1, 2009:
1-year old 3,000
January 1, 2009:
1-year old 3,000
2-year old 4,000
What is the fair value of biological assets on January 1, 2009?

a. 9,300,000 c. 8,500,000
b. 8,400,000 d. 8,900,000
PROBLEM 5 (adapted): Dairy Company provided the following balances for the year ended
December 31, 2009:
Cash 500,000
Trade and other receivables 1,500,000
Inventories 100,000
Dairy livestock- immature 50,000
Dairy livestock- mature 400,000
Property, plant and equipment, net 1,400,000
Trade and other payables 520,000
Note payable- long term 1,500,000
Share capital 1,000,000
Retained earnings- January 1 800,000
Fair value of milk produced 600,000
Gain from change in fair value 50,000
Inventories used 140,000
Staff costs 120,000
Depreciation expense 15,000
Other operating expenses 190,000
Income tax expense 55,000
What is the net income for 2009?

a. 210,000 c. 230,000
b. 130,000 d. 650,000
PROBLEM 6 (adapted): Salve Company is engage in raising dairy livestock. Information

regarding its activities relating to the dairy livestock is as follows:
Carrying amount on Jan. 1, 2011 5,000,000

Increase due to purchase 2,000,000
Gain arising from change in fair vale less
Cost to sell attribute to price change 400,000
Gain arising from change in fair value less
Cost to sell attribute to physical change 600,000
Decrease due to sale 850,000
Decrease due to harvest 200,000
What is the carrying amount of the biological asset on Dec. 31, 2011?
a. 6,950,000 c. 8,000,000
b. 6,000,000 d.
7,150,000
**********************************END*********************************
“NOTHING IS IMPLOSSIBLE”…mikecpamicbmba@125487

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ARTS CPA Review

(Academic Review and Training School, Inc.)

BIOLOGICAL ASSETS (PAS 41)

PROBLEM 1(adapted): Forester Company on adoption of PAS 41 reclassified certain assets as

Freestanding trees 5,100,000

PROBLEM 3 (adapted): Joan Company provided the following data:

Value of biological asset at acquisition cost on December 31 600,000

December 31, 2009:

What is the fair value of biological assets on January 1, 2009?

What is the net income for 2009?

PROBLEM 6 (adapted): Salve Company is engage in raising dairy livestock. Information

Carrying amount on Jan. 1, 2011 5,000,000

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