PROBLEM 13-1

Property
Biological Agricultural
Inventory Plant and
Assets Produce
Equipment
1. Sheep P400,000
2. Felled trees P2,680,000
3. Harvested cane 1,160,000
4. Coconut trees P4,800,000
5. Dairy cattle 4,000,000
6. Cigarette (Marlboro) 41,000
7. Sausages 20,000
8. Cured hams 36,000
9. Pig carcass 230,000
10. Fruit pickles 120,000
11. Trees in a plantation forest 12,000,000
12. Harvested cabbage 40,000
13. Carpet 260,000
14. Grape vines 1,500,000
15. Picked grape fruit 180,000
16. Wool 160,000
17. Tea 38,200
18. Cotton 1,360,000
19. Plants 1,400,000
20. Thread 80,000
21. Carrots due to be harvested next week 200,000
22. Low fat milk 520,000
23. Wine 6,000,000
24. Picked fruit 49,400
25. Frozen lechon (Cebu) 120,000
26. Mango tree with ripe mango not yet harvested 1,400,000
27. Guard dogs 300,000
28. Animals in zoo (eg. tigers, zebra, python, etc.) 24,000,000

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29. Dinosaur statue in zoo 1,000,000
30. Tomato vines (with ripe fruit ready for harvest) 500,000

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31. Strawberry plants 1,500,000
TOTAL eH w P18,500,000 P5,859,400 P7,235,200 P34,500,000

Nota Bene: Bearer plants that can bear fruits for more than 1 year are classified as PPE while bearer animals are classified

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as biological assets.
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PROBLEM 13-2
1. Yes, agricultural produce at the point of harvest are included within the scope of PAS 41.
2. 400,000 bucks, its fair value less cost to sell at the reporting date.
3. 30,000 bucks, computed as follows:
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Fair value less cost to sell – Dec. 31, 2018 400,000

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Less: FVLCTS at beginning of year 350,000

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FV of purchased herd on April 1 20,000

Increase in fair value P 30,000
4. The gain of 30,000 bucks is not required to be disaggregated under PAS 41 due to physical change or change in fair
value, but it is only encouraged.
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PROBLEM 13-3
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1. Yes, wool is classified as agricultural produce under PAS 41.

2. It is measured at its fair value less costs to sell at the time of harvest (shearing).
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3. No, after the point of harvest (shearing), the wool should be dealt under PAS 2 Inventories.
4. 15,000 bucks. Since the wool is subsequently measured under PAS 2, it should be measured at lower of cost or net
realizable value. The value of 16,500, which is assumed to be indication of net realizable value, is ignored since it is
higher than its cost of 15,000 bucks.
5. 14,500 bucks. If no fair value or net realizable value was provided on December 31, 2018, the selling price of the wool
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on February 28, 2019 (which is before the FS are authorized for issue) is considered an indication of the net realizable
value of the wool as of the reporting date under PAS 10, therefore it should be considered in measuring the net
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realizable value of the inventory on December 31, 2018. Therefore, the wool is measured at 14,500 bucks, which is
lesser than its cost of 15,000.

PROBLEM 13-4
1. The purchased wool is included within the scope of PAS 2, not PAS 41, because the wool was purchased, rather than
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harvested by the entity.

2. The inventory (wool) should be measured at lower of cost or net realizable value of 29,000 bucks. Please refer to
discussions on the previous case relating to the determination of net realizable value.

PROBLEM 13-5
1. 480 bucks. At the end of the reporting period, the entity has 100 tons of wheat to be sold under the contract at 480
bucks per ton. Generally, the fair value of the agricultural produce would not be adjusted to reflect future contract
prices; such prices are not relevant in determining fair value, because fair value should reflect the current market in
which a willing buyer and seller would enter into a transaction. However, when the stated selling price in the contract is
lower than the market price, as is the case here, the value assigned to the inventory would be based on the contract
price, which is 480 bucks and not fair value. The entity must reflect an onerous contract in the statement of financial
position, according to PAS 37.
2. 500 bucks. The value that must be used for the preparation of the financial statements is 500 bucks. The applicable
standard after harvest is PAS 2. PAS 2 uses the lower of cost and net realizable value test, and allows the consideration
of firm sales contracts. The sales contract protected the entity from the decline in market value of the 50 harvested
tons, and commitment to sell a further 70 tons is not onerous because the contract price exceeds the market price.
Accordingly, no write-down or provision is required.
PROBLEM 13-6

Requirement No. 1
3-year old animal (₱1,050 – ₱1,000) x 10 ₱ 500
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3-year old animal (₱1,110 – ₱1,080) x 1 30
Newborn animals (₱720 - ₱700) x 1 20
Total gain due to price change ₱ 550

Requirement No. 2
3-year old animal (₱1,200 – ₱1,050) x 10 ₱ 1,500
3-year old animal (₱1,200 – ₱1,110) x 1 90
Newborn animals (₱800 - ₱720) x 1 80
Total ₱ 1,670
Gain on initial recognition-newborn (₱700 x 1) 700
Total gain due to physical change ₱ 2,370

Requirement No. 3
3-year old animals (10+1) x ₱1,200 ₱13,200
.5-year old animals (1 x ₱800) 800
Carrying amount of biological asset, 12/31/2018 ₱14,000

PROBLEM 13-7

Question No. 1
Purchased before January 1, 2018 (2,100 x ₱4,000) ₱ 8,400,000
Purchased on January 1, 2018 (300 x ₱3,000) 900,000
Fair value – January 1 (A) ₱9,300,000

Question No. 2
Purchased on July 1, 2018 (750 x ₱3,000) ₱2,250,000
Fair value – July 1 (A) ₱2,250,000
Question No. 3

Purchased before January 1, 2018 (2,100 x ₱5,000) ₱10,500,000

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Purchased on January 1, 2018 (300 x ₱4,500) 1,350,000

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Purchased on July 1, 2018 (750 x ₱3,600) 2,700,000
Fair value – December 31 (A) ₱14,550,000

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Question No. 4
Fair value – December 31
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Less: Fair value – January 1 9,300,000
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Less: Fair value – July 1 2,250,000
Increase in fair value (A) ₱ 3,000,000
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Question No. 5
Purchased before Jan. 1, 2018 [2,100 x (₱5,000 - ₱4,500)] ₱1,050,000
Purchased on January 1, 2018 [300 x (₱4,500 - ₱3,200)] 390,000
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Purchased on July 1, 2018 [750 x (₱3,600 - ₱3,200)] 300,000

Increase in fair value - PHYSICAL(C) ₱ 1,740,000
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Question No. 6
Purchased before Jan. 1, 2018 [2,100 x (₱4,500 - ₱4,000)] ₱1,050,000
Purchased on January 1, 2018 [300 x (₱3,200 - ₱3,000)] 60,000
Purchased on July 1, 2018 [750 x (₱3,200 - ₱3,000)] 150,000
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Increase in fair value - PRICE (A) ₱ 1,260,000

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SUMMARY OF ANSWERS:
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1. A 2. A 3. A 4. A 5. C 6. A

PROBLEM 13-8
Requirement No. 1
1. To recognize to sale of dairy cows in 2018.
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Cash in Bank ₱1,072,000

Biological Assets (Dairy Livestock) ₱1,072,000
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2. To recognize livestock purchased in 2018.

Biological Assets (Dairy Livestock) ₱ 536,000
Biological Assets (Beef Livestock) 1,344,000
Cash in Bank ₱ 1,880,000
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3. To recognize the sale of beef cattle in 2018.

Cash in Bank ₱ 3,450,000
Biological Assets (Beef Livestock) ₱ 3,450,000

4. To recognize the milk harvested in 2018 at the point of harvest.

Inventories (a) ₱ 1,737,773
Gain on recognition of Inventories ₱ 1,737,773

5. To recognize the milk harvested in 2018 at the point of harvest.

Cash in Bank ₱ 1,735,273
Cost of Milk Sold (b) 1,735,273
Revenue ₱ 1,735,273
Inventories 1,735,273

6. To recognize the milk harvested in 2018 at the point of harvest.

Veterinary Expense ₱ 62,000
Water and Electricity Expense 48,000
Salaries 84,000
Cattle Feed 276,000
Wages 78,000
Cash in Bank ₱ 548,000
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7. To recognize the loss on change in fair value of dairy livestock at the end of the year.

Fair Value Loss (Biological Assets) (c) ₱ 400,600

Biological Assets (Dairy Livestock) ₱ 400,600

8. To recognize the gain on beef livestock at the end of the year.

Biological Assets (Beef Livestock) (c) ₱ 843,200

Fair Value Gain (Biological Assets) ₱ 843,200

Dairy Beef
Livestock livestock

Balance at start of 2018 ₱ 5,589,000 ₱ 2,975,000

Increase resulting from purchases 536,000 1,344,000

Decrease resulting from sale (1,072,000) (3,450,000)

Gain (loss) from changes in fair value less (400,600)

costs to sell(c) 843,200

Balance at the end of 2018 ₱ 4,652,400 ₱ 1,712,200

(a) 360,000 litres of milk × ₱0.55/litre + 875,150 litres of milk × ₱0.6/litre + 1,561,050 litres of milk × ₱0.65/litre =
₱1,737,773 fair value less costs to sell of milk produced in 2018.

(b) ₱17,000 opening inventory + ₱1,737,773 fair value less costs to sell of milk produced in 2018 less ₱19,500 closing

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inventory = ₱1,735,273 cost of milk sold.

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(c) The gain or loss from changes in fair value less costs to sell is calculated as the balancing figure in the reconciliation in
note X above. eH w
Requirement No. 2

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31 Dec 2018 31 Dec 2017
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Biological assets ₱6,364,600 ₱8,564,000
Inventories—milk 19,500 17,000
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Requirement No. 3

Revenue—milk sold ₱1,735,273

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Cost of milk sold (1,735,273)

Gain from changes in fair value less costs to sell of 442,600
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biological assets
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Gain on recognition of agricultural produce—milk 1,737,773

Staff costs (162,000)
Cattle feed (276,000)
Veterinary costs (62,000)
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Water and electricity (48,000)

Net income ₱1,632,373
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Requirement No. 4

Cash flows from operating activities:

Cash receipts from sales of milk 1,735,273
Cash receipts from sale of beef and dairy livestock net 4,522,000
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of auctioneer’s commission*
Cash paid to suppliers and employees (548,000)
Cash paid for purchases of beef and dairy livestock 1,900,000)
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*It is assumed that the cash flows received for selling the livestock were received net of the auctioneer’s commission.

SUMMARY OF ANSWERS:
1. E 2. E 3. C 4. D 5. D
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