UNIVERSITY OF NUEVA CACERES

City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING

JSD

EXERCISES
Gatas,INC. produces milk on its farms. It produces 30% of the country’s milk that is consumed. Gatas Owns
450 farms and has a stock of 21,000 cows and 10,500 heifers. The farm produce 8 million kilograms of milk a
year and the average inventory held is 150,000 kilograms of milk. However, the company is currently holding
stocks of 500,000 kilograms of milk in powder form.

At October 31, 2014, the herds are:

 21,000 cows (3 years old), all purchased on or before Nov. 1, 2013
 7,500 heifers, average age 1.5 years, purchased on April 1, 2014
 3,000 heifers, average age 2 years, purchased on November 1, 2013

No animals were born or sold in the year.

The unit fair values less estimated point-of-sales cost were:

1 year-old animal at October 31, 2014 P3,200
2 year-old animal at October 31, 2014 4,500
1.5 year-old at October 31, 2014 3,600
3-year-old animal at October 31, 2014 5,000
1 year old animal at November 1, 2013 and
April 1, 2014 3,000
2 year old animal at November 1, 2013 4,000

The company has had problems during the year: Contaminated milk was sold to customers. As a result, milk
consumption has gone down. The government had decided to compensate farmers for potential loss in
revenue from sale of milk, This fact was published in the national press on September 1, 2014. Gates received
an official letter on October 10, 2014, stating that P5 million would be paid to it on January 2, 2015.

The company’s business is spread over different part of the country. The only region affected by the
contamination was Central Visayas, where the government curtailed milk production in the region. The Cattle
unaffected by the contamination and were healthy. The company estimates that the future discounted cash
flow income from the cattle in the Central Visayas region amounted to P4million, after taking into account the
government restriction order. The company feels that it cannot measure the fairvalue of the cows in the region
because of the problems created by the contamination. There are 6,000 cows and 2,000 heifers in the region.
All these animals had been purchased on November 1, 2013. A rival company had offered Gatas P3 million for
these animals after point-of-sale cost and further offered P6 million for the farm themselves in that region.
Gatas has no intention of selling the farms at present. The company has been applying PAS 41 since
November 1, 2013

1. What is the fair value of the cattle (excluding Central Visayas Region) at November 1, 2013?
a. P93 million b. P64 million c. P63 million d. P48 million

2. What is the fair value of the cattle (excluding Central Visayas Region) at October 31, 2014?

Page 1 of 6
 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING

JSD
a. P106.5 million b. P113.5 million c. P105.6 million d. P105.75 million

3. What is the increase in fair value of the cattle (exluding Central Visayas region) due to price change?
a. 10.7 million b. P12.8 million c. P9.2 million d. P16.7 million

4. What is the increase in fair value of the cattle (excluding Central Visayas Region) due to physical change?
a. P9.2 million b. P11.8 million c. P18.55 million d. P9.4 million

5. On October 31, 2014, the cattle in the Central Visayas region would be valued at
a. P39 million b. P3 million c. P4 million d. P5 million

MANGO BANGGO purchased a mango farm in August 2014 for P2,250,000. The purchase was risky because
the growing season was coming to an end, the mangoes must be harvested in the next few weeks, the Mango
has limited experience in carrying off a mango harvest.

At the end of the first quarter of operations, Mango is feeling pretty good about his early results. The first
harvest was a success; 30,000 kilos of mangoes were harvested with a value of P90,000,000 (based on
current local commodity prices at the time of harvest). The fair value of Mango’s Mongo farm has increased by
P45,000 at the end of the quarter. After storing the mangoes for a short period of time, Mango was able to sell
the entire harvest for P105,000.

6. What amount of gain should be recognized on the change in fair value of Mango’s mango farm?
a. P150,000 b. P45,000 c. P90,000 d. P135,000

Gain from change in FV of biological asset

7. At what amount should the mangoes harvested be initially recorded on Mango’s books?
a. P90,000 b. P105,000 c. P60,000 d. P150,000

Agricultural produce at fair value

8. What is the total effect on income for the quarter related to Mango’s Biological asset and agricultural
produce?
a. P150,000 b. P45,000 c. P15,000 d. 60,000

Gain from change in FV – Biological asset 45,000

Gain from change in FV – agricultural produce 90,000
Gross profit on sold mangoes 15,000
Total effect on Income 150,000

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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING

JSD
9. Which of the following statements is true about biological assets?
a. Biological assets are only found in Biotech entities.
b. Biological assets are living animals or plants and must be disclosed as a separate item in the
statement of financial position.
c. Biological assets must be valued at cost.
d. Biological assets do not generally have future economic benefits.

Items 10 to 12 are based on the following information:

A herd of 50, 1-year old and 50, 2-year old animals were held by Icon Company at January 1, 2015. The
company also purchased 20 animals aged 1.5 and 20 animals aged 2.5 on July 1, 2015. The following are
the fair value of the biological assets:
Age of animals Jan. 1, 2015 July 1, 2015 Dec. 31, 2015
1.0-year old P 2,500 P 3,000 P 3,500
1.5-year old 3,750 4,500 5,250
2.0-year old 5,000 6,000 7,000
2.5-year old 6,250 7,500 8,750
3.0-year old 7,500 9,000 10,500
No animals were born during 2015.

10. How much of the increase in the fair value of the biological assets due to price change?
a) P115,000 c) P180,000
b) P130,000 d) P190,000

11. How much of the increase in the fair value of the biological assets due to physical change?
a) P205,000 c) P385,000
b) P240,000 d) P420,000

12. What is the fair value of the biological assets as of December 31, 2015?
a) P1,085,000 c) P1,225,000
b) P1,145,000 d) P1,470,000

Starry Company cultures tiger prawns in one hundred one-acre brackish water ponds in a parcel of mangrove
land in Laguna leased from the government. The grow-out or transformation phase of prawns takes about four
months. As of December 31, 2014, the biological assets of the farm consisted of:
Est. FV per pond
Age group attribute Batch qty. by no. of ponds culture-point of sale costs
One-month culture 20 P 5,000
Two-month culture 25 10,000
Three-month culture 25 15,000
Four-month culture 15 20,000
Just Harvested 15 nil

During the year, three hatches of culture were harvested and sales of prawns for the year totaled P6,000.000.
At December 31, 2015, the biological assets of the farm consisted of:

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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING

JSD
Est. FV per pond
Age group attribute Batch qty. by no. of ponds culture-point of sale costs
One-month culture 15 P 5,000 – 75,000
Two-month culture 25 10,000 – 250,000
Three-month culture 20 15,000 – 300,000
Four-month culture 30 20,000 – 600,000
Just Harvested 10 nil

TOTAL 1,225,000
13. What is the total fair value of closing aquaculture stocks on December 31, 2015?
a) P 625,000 c) P1,150,000
b) P 900,000 d) P1,225,000

14. A herd of 10 four year old animals was held on 1 January 2015. On 1 July 2015 four 4 1/2 year old animal
was purchased. The fair values less estimated point of sale costs were as follows: 4 year old animal at 1
January 2015 P15, 000; 4 1/2 year old animal at 1 July 2015 P15, 900; 5 year old animal at 31 December
2015 P17, 250. What amount should the company recognize in its December 31, 2015 statement
comprehensive income related to the animals as a result of the change in their fair market value?
a) P25,200
b) P27,900
c) P31,800
d) P57,000

Jan 1, 2015 10-4 yr old x 15,000 = 150,000

July 1, 2015 4- 4 1/2yr old x 15.9k = 63,600
Dec 31, 2015 (P14.00 x 17,250) = (241,500)
Gain on Sale 27,900,000

Items 15 to 17

An entity produces milk for local ice cream producers. The entity began operations at the beginning of the
current year by purchasing milking cows for P5,000,000. Then entity provided the following information at year
end relating to the milking cows:
Carrying Amount – Beginning of the year 5,000,000
Change in fair value due to growth and price change 2,000,000
Decrease in fair value due to harvest 250,000
Newborn calf at year end at fair value 400,000
Milk Harvested during the year but not yet sold 850,000
15. What amount of gain on biological asset should be reported in the current year?
a. 2,400,000 b. 2,150,000 c. 3,000,000 d. 3,250,000

2,000,000 – 250,000 + 400,000 = 2,150,000

16. What amount of gain on agricultural produces should be recognized in the current year?
a. 1,250,000 b. 1,000,000 c. 850,000 d. 0

17. What is the carrying amount of the biological asset at year-end?

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 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING

JSD
a. 8,000,000 b. 8,250,000 c. 7,150,000 d. 7,600,000

2,150,000 + 5,000,000 = 7,150,000

Page 5 of 6
 UNIVERSITY OF NUEVA CACERES
City of Naga
COLLEGE OF BUSINESS AND ACCOUNTANCY
Comprehensive Accounting A/Y 2018-2019

FINANCIAL ACCOUNTING AND REPORTING

JSD

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