Accounting 106 Seatwork

Problem 1

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 has a stock of 2,100 cows and 1,050 heifers.

The farm produces 800,000 kilograms of milk a year and the average inventory held is 15,000 kilograms
of milk. However, on December 31, 2020 the entity is currently holding 50,000 kilograms of milk in
powder. On December 31, 2020, the biological assets are:

Purchased on or before January 1, 2020 (3 years old) 2,100 cows

Purchased on January 1, 2020 (2 years old) 300 heifers
Purchased on July 1, 2020 (1.5 years old) 750 heifers

No animals were born or sold during the current year. The unit fair value less cost of disposal is as
follows:

January 1, 2020

1-year old 3,000

2-year old 4,000

July 1, 2020

1-year old 3,000

December 31, 2020

1-year old 3,200
2-year old 4,500
1.5-year old 3,600
3-year old 5,000

The entity has had problems during the year. Contaminated milk was sold to customers. As a result, milk
consumption has gone down. The entity’s business is spread over different parts of the country.

There are 600 cows and 200 heifers in the Batangas farm and all these animals had been purchased on
January 1, 2020.
Problem 2

The following pertains to the biological assets owned by Letlet Farms, Inc.:

Carrying amount at January 1 4,597,500

Price of Purchased biological asset 262,500
Gain arising from changes in fair value less cost to sell attributable
to physical changes 153,580
Gain arising from changes in fair value less cost to sell attributable
to price changes 245,810
Fair value of agricultural produce at time of harvest 270,000
Commission to brokers and dealers attributable to purchases 20,000
Levies by regulatory agencies and commodity exchanges 55,000
attributable to purchases
Transfer taxes and duties attributable to purchases 27,000
Transport and other costs necessary to get assets to a market
attributable to purchases 10,000
Decrease in fair value of biological asset due to harvest 180,000
Sales of biological asset at FV 360,000

Problem 3

Tinky Winky Farming Corp. has a flock of sheep with were shorn shortly before the year end. On October
16, 2019, the time of shearing, the fair value of the wool less costs to dispose was determined to be
P14,000 and this fair value has risen to P16,800 by December 31, 2019. The company estimates that it
would incur P500 to dispose the wool to the nearest market at December 31, 2019. The net realizable
value of the wool is estimated to be P12,700.

On February 14, 2020, the wool was subsequently sold for P13,000.