PAS 41 1

INTERMEDIATE ACCOUNTING 2
Biological Assets

September 10, 2021 Prelim Quiz No. 2

E When a computation for a certain item is necessary, please show it in a good form as an accountant,
not as a mathematician. Improper presentation of supporting computation will cost you deduction in
points.
E You can have your answers handwritten or encoded in an Excel file. The file name should be in this
format: IA2_Surname_PQ2_PAS41. Send it to my domain address: [email protected].
E Most of all, manifest your integrity in taking this quiz. God bless you.

PROBLEM 1: TRUE OR FALSE

T or F

1. Any biological asset should be measured initially and at the end of each reporting period, at its fair
value less costs to sell.
2. According to PAS 41, agricultural produce can always be measured reliably.
3. The fair value of a biological asset or produce is not necessarily adjusted because of the existence of
a contract to sell the biological assets at a future date.
4. In some cases, fair value less costs to sell may not be determinable for a biological asset in its
present condition.
5. Agricultural land is accounted for either under PAS 16 Property, Plant and Equipment or PAS 41
Investment Property, including biological assets that are attached to the land.
6. PAS 41 Agriculture applies to pure exploitation activities.
7. Once the biological transformation is complete, the accounting principles imposed on PAS 41 will
cease to apply.
8. Bearer plants related to agricultural activities are under the scope of PAS 41 Agriculture.
9. A pregnant sheep and its offspring will be recognized as separate assets.
10. Bearer plants that are no longer used and sold as scrap will be covered by PAS 16 Property, Plant
and Equipment.

PROBLEM 2: MULTIPLE CHOICE THEORIES

Write only the letter of the best answer.

1. Which of the following statements are correct regarding biological assets?

i. Biological assets whose fair value cannot be determined reliably shall be measured at cost
less accumulated depreciation and impairment losses.
ii. Agricultural produce shall be measured at cost less accumulated depreciation and
impairment losses, when its fair value cannot be measured reliably.
iii. The price in an active market is considered to be the best basis for determining the fair
valie of biological assets and agricultural produce.
iv. The change in fair value less cost to sell of biological assets is reported in profit or loss in
the period in which the changes arise.

a. i, ii & iii b. ii, iii & iv c. i, iii & iv d. i, ii & iv

2. Paolo Company had a plantation forest at Baguio City that is taken care of Yen Company as a
friend. The said forest is likely to be harvested and sold in 10 years. How should the income be
accounted for?
a. The plantation forest should be valued every five years and the increase in value should be
shown in the income statement of recognized gains and losses.
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 PAS 41 2
b. Income should be measured annually and reported using a fair value approach that
recognizes and measures biological growth.
c. The eventual proceeds from sale should be estimated and matched to the profit and loss
account over the 10-year period.
d. No income should be reported until first harvest and sale in 10 years.

3. Which of the following is considered as bearer plants?

a. Plants cultivated to be harvested as agricultural produce
b. Plants such as cotton plants, tea bushes, grape vines, fruit trees and oil palms
c. Plants cultivated to produce agricultural produce where there is more than remote
likelihood that the entity will also harvest and sell the plants as agricultural produce
d. Annual crops such as wheat and corn

4. Which of the following is not a characteristic of bearer plants?

a. Used in the production or supply of agricultural produce
b. Has a remote likelihood of being sold as agricultural produce
c. Expected to bear produce at least once
d. All of these are characteristics of bearer plants

5. Which of the following costs are not included in costs to sell?

a. Commissions to brokers and dealers
b. Levies by regulatory bodies
c. Transfer taxes and duties
d. Transport and other costs necessary to get the asset to a market

6. Biological assets relating to agricultural activity shall be measured using

a. Historical cost
b. Historical cost less accumulate depreciation and impairment
c. Fair value approach
d. Net realizable value

7. When agricultural produce is harvested, the harvest should be accounted for by using PAS 2
Inventories or another applicable standard. Cost at the point of harvest is deemed to be
a. Its fair value less cost to sell
b. The historical cost of the harvest
c. The historical cost less accumulated impairment losses
d. The market value

8. Animals related to recreational activities, for example, game parks and zoos, including the natural
breeding of animals in zoos, shall be accounted for under what standard?
a. PAS 41 Agriculture c. PAS 16 Property, Plant and Equipment
b. PAS 40 Investment Property d. Either PAS 41 or PAS 16

9. Agricultural activity
a. Is the aggregate of similar living animals or plants
b. Is the detachment of agricultural produce from a biological asset
c. Comprises the processes of growth, degeneration, production and procreation of a biological
asset
d. Is the management by an entity of the biological transformation of biological asset into
agricultural produce or additional biological asset

10. Where there is a production cycle of more than one year, PAS 41 encourages separate disclosure of
the
a. Physical change only c. Total change in value
b. Price change only d. Physical change and price change
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 PAS 41 3
11. Which of the following is accounted for under PAS 41 Agriculture?
a. Sausages, cured hams b. Processed fruit c. Apples d. Sugar

12. Agricultural activity includes all of the following, except

a. Raising livestock c. Floriculture and aquaculture, including fishing
b. Annual perennial cropping d. Ocean fishing

13. Which statement is incorrect concerning biological assets?

a. Biological assets are living plants and animals.
b. Agricultural activity is the management by an entity of the biological transformation of
biological asset into agricultural produce or additional biological asset.
c. Biological assets are measured at fair value less cost to sell.
d. Agricultural produce is measured at fair value less cost to sell at the point of harvest less
normal profit margin.

14. Where there is a long aging or maturation process after harvest of agricultural produce, the
accounting for such products should be dealt with by
a. PAS 41 Agriculture c. PAS 16 Property, Plant and Equipment
b. PAS 2 Inventories d. PAS 40 Investment Property

15. Which of the following is not dealt with by PAS 41 Agriculture?

a. The accounting for biological assets
b. The initial measurement of agricultural produce at the point of harvest
c. The processing of agricultural produce after harvesting
d. The accounting treatment of unconditional government grants related to biological assets

16. Which of the following is an incorrect combination?

Biological asset /
Bearer plants Agricultural produce Product after harvest
a. Trees Felled trees Logs, lumber
b. Dairy cattle Cheese Milk
c. Pigs Carcass Sausage
d. Tobacco plants Picked tobacco leaves Cured tobacco

17. An unconditional government grant related to a biological asset that has been measured at fair
value less cost to sell should be recognized as
a. Income when the grant becomes receivable
b. A deferred income when the grant becomes receivable
c. Income when the grant application has been submitted
d. A deferred credit when the grant has been approved

18. If a government grant is conditional on certain events, then the grant should be recognized as
a. Income when the conditions attached to the grant are met
b. Income when the grant has been approved
c. A deferred income when the conditions attached to the government grant are met
d. A deferred income when the grant is approved

19. All of the following would be classified as biological asset, except

a. Dairy cattle b. Chicken c. Egg d. Tree

20. All of the following are classified as agricultural produce, except

a. Sugar b. Wool c. Cotton d. Milk

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 PAS 41 4
PROBLEM 3

The following information pertains to Doctor Kwak Kwak Company, a company operating in a diverse
agricultural activity:

Sheep P 400,000
Felled trees 2,680,000
Harvested cane 1,160,000
Coconut trees 4,800,000
Dairy cattle 4,000,000
Cigarette 41,000
Sausages 20,000
Cured hams 36,000
Pig carcass 230,000
Fruit pickles 120,000
Trees in a plantation forest 12,000,000
Harvested cabbage 40,000
Carpet 260,000
Grape vines 1,500,000
Picked grape fruit 180,000
Wool 160,000
Tea 38,200
Cotton 1,360,000
Consumable plants 1,400,000
Thread 80,000
Carrots to be harvested next week 200,000
Low fat milk 520,000
Wine 6,000,000
Picked fruit 49,400
Frozen lechon 120,000
Mango tree 1,400,000
Guard dogs 300,000
Animals in zoo 24,000,000
Dinosaur statue in zoo 1,000,000
Tomatoes growing in tomato vines ready for harvest 500,000
Strawberry plants 1,500,000

QUESTIONS:
How much is classified as:
1) Biological assets? 3) Inventory?
2) Agricultural produce? 4) Property, plant and equipment?

PROBLEM 4

The following independent cases are related to initial measurement, subsequent measurement
and carrying amount of biological assets and agriculture produce. Determine what is being
asked in such a case.

1) On December 31, 2021, the following information was gathered for the biological assets of Kina
‘Tay Poultry:
Price of the biological assets in an active market P 3,600,000
Broker’s commission 45,000
Levies by the regulatory bodies 12,000
Transport and other costs to get the assets to the market 40,000

At how much should the biological assets be presented in the statement of financial position?

2) The following information is made available by Mongolia Farms in Batangas City relating to its
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dairy livestock during 2021:

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 PAS 41 5
Carrying amount, January 1 P 1,000,000
FVLCTS of livestock purchased during the year 340,000
Increase in FVLCTS due to physical change 180,000
Increase in FVLCTS due to price change 40,000
FVLCTS of livestock sold during the year 890,000

a. How much should be reported as biological assets as of December 31, 2021?

b. What amount should be included in profit or loss section of Mongolia Farms’ income statement
as a result of transactions on its dairy livestock?

3) Melon Kami Nyan Company harvested corn with fair value of P700,000 at the date of harvest.
Estimated cost to sell is P20,000. At year-end, it was determined that the net realizable value of
the corn amounted to P660,000 and no corn has been sold at year-end.

a. At what amount shall the harvested corn be initially recognized in accordance with PAS 41?
b. At what amount shall the corn be presented at year-end?
c. Assume that the net realizable value of the corn at year-end amounted to P690,000, at what
amount shall the corn be presented at year-end?

Hint in (b) and (c): LCNRV rule

PROBLEM 5

Case 1
A herd of 10 2-year-old animals was held at January 1, 2018. One animal aged 2.5 years was purchased on
July 1, 2018 for P1,080, and one animal was born on July 1, 2018. No animals were sold or disposed of
during the period. Per unit FVLCTS were as follows:

Jan. 1, 2018 July 1, 2018 Dec. 31, 2018

New born animal P 700 P 720
1/2-year-old animal P 800
2-year-old animal P 1,000 P 1,050
2.5-year-old animal P 1,080 P 1,110
3-year-old animal P 1,200

QUESTIONS:
1) How much is the increase in FVCLTS due to price change?
2) How much is the increase in FVCLTS due to physical change?
3) How much is the FVCLTS of herd at December 31, 2018?

Case 2
Farmville Corporation produces milk on its farms located in the Visayas region. At December 31, 2022,
the herds of cows are as follows:
 1,000 cows (3 years old) all purchased in prior years
 500 heifers (1.5 years old when purchased on June 30, 2022)
 250 heifers (2 years old) purchased on December 31, 2022

No animals were born or sold during 2023. The per unit FVLCTS of the animals were as follows:

1.5 years old 2 years old 3 years old 4 years old

Dec. 31, 2022 P 14,500 P 17,500 P 19,000
Dec. 31, 2023 P 16,000 P 20,000 P 27,500 P 23,500
QUESTIONS:
1) What is the carrying amount of the biological assets as of December 31, 2022?
a. P30,625,000 b. P31,000,000 c. P32,125,000 d. P32,500,000
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 PAS 41 6
2) What is the gain from changes in FVLCTS due to price change during 2023?
a. P5,875,000 b. P6,375,000 c. P6,625,000 d. P13,000,000

3) What is the gain from changes in FVLCTS due to physical change during 2023?
a. P5,875,000 b. P6,375,000 c. P6,625,000 d. P13,000,000

4) What is the carrying amount of the biological assets as of December 31, 2023 to be presented in non-
current section of the statement of financial position?
a. P32,125,000 b. P36,500,000 c. P38,500,000 d. P45,125,000

END OF QUIZ
***NOTHING FOLLOWS***

“Love isn’t complicated. People are.”

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