ACYFAR3

AGRICULTURE
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PROBLEM 1: Consumable animals; price change and physical change

Tree House Inc. is in the business of processing animal meat. As of January 1. 20A1, Tree House Inc. had
a herd of 10, two-year old animals, with fair value less cost to sell of P1,000 each. On July 1, 20A1, Tree
House purchased one 2.5 year old animal for P1,080. One animal was also born on the same date. No
animals were sold or disposed of during the period. However, 2 animals died on July 1, 20A1. The per-unit
fair values less costs to sell were as follows:

2 year old animal, January 1, 20A1 P1,000

Newborn animal, July 1, 20A1 700
2.5 year old animal, July 1, 20A1 1,080
New born animal, December 31, 20A1 720
0.5 year old animal, December 31, 20A1 800
2 year old animal, December 31, 20A1 1,050
2.5 year old animal, December 31, 20A1 1,110
3 year old animal, December 31, 20A1 1,200

Required:
1. Prepare the necessary journal entries for the year 20A1.
2. Compute price and physical change.

PROBLEM 2: Bearer animals; agricultural produce due at the point of harvest; inventories

Energy Dairy, Inc. is engaged in the production of milk for the supply to various customers. As of January
1, 20A1, Energy held 420 cows able to produce milk (mature assets) and 140 heifers being raised to produce
milk in the future (immature assets). These biological assets have the following fair values less costs to sell
as of January 1, 20A1:
Dairy livestock – immature P 308,000
Dairy livestock – mature 2,100,000

In addition, as of January 1, 20A1, Energy has 5,000 kg. of milk on hand with carrying amount of P24,000.

The following transactions occurred in 20A1:

§ March 1, 20A1 – Energy purchased 5 cows able to produce milk for P5,100 each.

§ June 1, 20A1 – Energy sold 10 mature dairy livestock for P6,000 each.

§ During the year, 12 heifers were born on the following dates (Energy engaged a third party for breeding
the cows):
April 1 –2
May 1 –3
August 1 –2
October 1 –3
December 1 –2

§ During the year, Energy produced 200,000 kg. of milk with total fair value less costs to sell of
P1,000,000 at the time of milking.

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§ During the year, Energy sold 202,000 kg. of milk for P1,200,000. Energy used the FIFO method and
the perpetual inventory system. On December 31, 20A1, the net realizable value of milk inventory is
P4.70 per kg.

§ During the year, 2 heifers (not newborn) and 3 mature cows (not purchased this year) died on the
following dates:
February 1 –1 heifer
April 1 –2 mature cows
July 1 –1 heifer and 1 mature cows

The fair value less costs to sell of the dairy livestock are as follows:

For purposes of valuation, assume that the newborns are classified as immature as of December 31, 20A1.
Also, assume that the immature livestock on January 1, 20A1 are still immature at the end of the year.
Ignore the effect of physical changes in biological assets, except when otherwise stated.

Required: Prepare the necessary journal entries for 20A1.

PROBLEM 3: Consumable plants; changes in fair value less costs to sell; agricultural produce

Cereals Corporation maintains a rice and corn farm. It grows, harvests, and sells the agricultural produce
generated by these biological assets. As of January 1, 20A1, Cereals’ financial statements contain the
following information:
Inventories:
Rice inventories P3,000,000
Corn inventories 2,000,000
Biological assets:
Rice consumables 4,000,000
Corn consumables 3,500,000

The following transactions transpired in 20A1:

a. Purchased rice and corn seedlings worth P1,500,000 and P1,400,000, respectively, and initially incurred
planting costs of P5,000,000 for rice and P2,200,000 for corn.

b. Incurred the following costs subsequent to planting (60% related to rice and 40% related to corn)
Cleaning costs P3,000,000
Land maintenance 1,000,000
Utilities 900,000
Labor costs 800,000

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c. Fair value less costs to sell of the following biological assets increased by the following amounts during
the year: rice, P6,000,000; corn, P4,800,000.

d. Harvested agricultural produce with the following fair value less costs to sell at the time of harvest:
rice, P9,800,000; corn, P7,400,000.

e. Sold its rice and corn inventories for P16,000,000 and P14,200,000, respectively. These had carrying
values of P10,200,000 and P8,000,000, respectively.

f. Incurred the following expenses:

Salaries expenses P1,800,000
Supplies expenses 750,000
Commissions expenses 3,000,000
Other selling expenses 1,550,000
Administrative expenses 1,320,000
It is the policy of Cereals to recognize as outright expense planting costs and subsequent expenditures
incurred in connection with its biological assets.

Required:
1. Prepare all the necessary journal entries for 20A1.
2. Prepare a condensed statement of profit or loss for the year 20A1.

PROBLEM 4: Bearer plants; changes in fair value less costs to sell; agricultural produce;
government grants

Mango Torte Corporation maintains a mango plantation in a remote locality. It has a number of mango trees
which bear bruits which are subsequently harvested and sold. As of January 1, 20A1, it has the following
inventories and biological assets:

Mango inventories P8,000,000

Mango fruits 2,300,000
Mature mango trees (excluding fruits) 5,500,000
Immature mango trees 4,200,000

Mango fruits represent agricultural produce growing on mature mango trees. Bearer mango trees have an
average useful life of ten years, starting from date of maturity. It is the policy of Mango Torte to recognize
a full year depreciation in the year of initial recognition of any depreciable assets.

The following transactions transpired in 20A1:

a. Purchased seedlings worth P1,000,000 and initially incurred planting costs of P1,500,000.

b. Incurred cleaning, maintenance, utilities, and labor costs subsequent to planting as follows:
Mature P2,900,000
Immature 3,600,000

c. Fair value less costs to sell of the following assets increased by the following amounts during the year:
Mango fruits P5,000,000
Mature 1,700,000
Immature 4,200,000

d. Certain immature mango trees are already capable of bearing fruits with accumulated cost of
P3,700,000.

e. Harvested agricultural produce with fair value less costs to sell of P6,000,000 at the time of harvest.
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f. Sold mango fruits for P20,000,000 during the year with carrying amount of P12,000,000.

g. Incurred the following expenses:

Selling expenses P1,350,000
Administrative expenses 1,200,000

h. At the end of the year, inventories has net realizable value of P1,750,000.

Moreover, Mango Torte applied for a government grant for locating its mango plantation in a less-
developed location. Under existing government rules, companies locating their mango plantation in less-
developed areas are entitled to government grants and incentives. Mango Torte’s application was granted
effective January 1, 20A1, with the following incentives:

a. A government grant of P3,000,000 cash was provided to Mango Torte during 20A1. However, it is
required to maintain its mango plantation in that area for three years. In the event that Mango Torte
fails to maintain the plantation for three years, it will have to repay the government an amount in
proportion to the passage of time calculated based on the nearest month. The repayment should be paid
in cash to the government.

b. The government requires Mango Torte to produce at least 5,000,000 kg. of mangoes every year. If it
fails to produce such amount, it will repay the government P200,000 for each year of failure. The
repayment should be paid in cash on January 31 of the subsequent year.

c. Mango Torte is granted an income tax holiday (ITH) incentive for three years from the date of approval
of the grant.

Production for 20A1 totaled 7,000,000 kg. of mangoes.

Required:
1. Prepare all the necessary journal entries for 20A1.
2. Determine the carrying values of Mango Fruits, Mango Inventories, Mature Mango Trees,
Immature Mango Trees, and Deferred Government Grant as of December 31, 20A1.
3. Prepare a condensed statement of profit or loss for 20A1.

June 2020

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