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Chapter 8

The document contains a series of true or false statements and multiple-choice questions regarding biological assets and agricultural produce, focusing on their measurement and accounting under the GAM for NGAs. It addresses concepts such as fair value, costs to sell, and the recognition of gains and losses. Additionally, it includes problems for classroom discussion related to the management and valuation of biological assets.

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18 views5 pages

Chapter 8

The document contains a series of true or false statements and multiple-choice questions regarding biological assets and agricultural produce, focusing on their measurement and accounting under the GAM for NGAs. It addresses concepts such as fair value, costs to sell, and the recognition of gains and losses. Additionally, it includes problems for classroom discussion related to the management and valuation of biological assets.

Uploaded by

karryl barnuevo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CHAPTER 8

PROBLEM 8-1: TRUE OR FALSE


False 1. Living animals and plants are always accounted for biological assets.
True 2. Biological assets are initially and subsequently measured at fair value
less costs to sell.
True 3. Agricultural produce is measured at fair value less costs to sell only
at the
point of harvest.
True 4. An essential element of agricultural activity is the management of
the biological transformation of biological assets.
True 5. Entity A’s dairy cattle gave birth to a calf. The fair value less costs
to sell of the new born calf is P10,000. Entity A recognizes a gain of
P10,000 from the
initial recognition of the calf.
True 6. A loss can arise from the initial measurement of a biological asset.
False 7. Fair value is quoted price in an active market less transaction costs.
True 8. Entity A acquires a biological asset for P100, equal to fair value, and
incurs transaction cost of P10 on the purchase. If the asset’s costs to
sell is P20, Entity A will recognize a loss of P30 on the initial
recognition of the
purchased asset.
False 9. Entity A recognizes a gain of P100 from the change in FVLCS of its
biological
assets during the period. If the change in FVLCS due to price change
is P70, the change in FVLCS due to physical change must be P40.
True 10. If there are more than one active markets for a biological asset, the
entity shall use the price in the market expected to be used when
determining fair
value.

PROBLEM 8-2: MULTIPLE CHOICE


1. According to the GAM for NGAs, a biological asset is
a. an animal or plant
b. an asset used in farming
c. a living animal or plant
d. a harvested product

2. The common features of agricultural activities include all of the following except
a. capability to change
b. management of change
c. measurement of change
d. wind of change

3. Which of the following is an agricultural produce?


a. carabao
b. harvested palay
c. extra rice
d. powdered milk
4. According to the GAM for NGAs, biological assets are measured as follows:
Initial measurement Subsequent measurement
a. fair value less cost to sell fair value less cost to sell
b. cost cost less
accumulated
depreciation
c. cost cost less accumulated
depreciation and
impairment
losses
d. fair value less costs to sell cost

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


a. commissions to brokers
b. levies by regulatory agencies and commodity exchanges
c. transfer taxes and duties
d. transport costs

6. According to the GAM for NGAs, if there is no active market for a biological asset
a. the entity shall measure the biological asset at cost less accumulated
depreciation.
b. the entity shall measure the biological asset at cost less accumulated
depreciation and accumulated impairment losses.
c. the entity shall use a contract price in determining the fair value.
d. the entity shall estimate the market price using the guidance set forth in the GAM
for NGAs.

7. Agricultural produce after the point of harvest is accounted for as


a. Inventory
b. PPE
c. Prepaid assets
d. Investment property

8. The carrying amount of a group of biological assets of Entity A is P100,000 before


any year- end adjustment. If the year-end fair value is P120,000 while the year-
end estimate of costs to sell is P5,000, which of the following statements is
correct?
a. Entity A will recognize a gain of P15,000 in surplus or deficit.
b. Entity A will recognize a gain of P15,000 directly in equity.
c. Entity A will recognize a gain of P10,000 in surplus or deficit.
d. Entity A will recognize a gain of P25,000 in surplus or deficit.

9. Which of the following need not be disclosed in relation to the accounting for
biological assets?
a. Consumable and bearer biological assets
b. Mature and immature biological assets
c. The amount of change in fair value less costs to sell due to physical changes
and due to price changes
d. The gain or loss on initial recognition of agricultural produce separately from that
of biological assets
10.Entity A is determining the measurement of its biological assets at the end of the
period. Entity A’s biological assets consist of trees in a plantation forest. There is
no separate active market for these trees. However, Entity A was able to gather
the following information:
• FVLCS of land, land improvements and trees as a package, P10M.
• FVLCS of land, P8M.
• FVLCS of land improvements, P500,000

How much is the valuation of the trees in Entity A’s year-end statement of financial
position?
a. P10,000,000
b. P2,000,000
c. P1,500,000
d. P1,000,000

PROBLEM 8-3: FOR CLASSROOM DISCUSSION


1. Living animals and plants are accounted for as biological assets
a. only if they are harvested for sale.
b. only if they relate to agricultural activity.
c. in all cases.
d. all of these.

2. The essential element of an agricultural activity is


a. the management of the biological transformation of biological assets.
b. the assets are alive.
c. it involves harvesting activity.
d. the conversion of raw materials into finished goods.

3. Which of the following is a biological asset?


a. Land used in farming
b. Picked fruits
c. Fruit cocktail
d. Trees in a plantation forest

4. Which of the following statements is correct regarding the measurement of


assets related to agricultural activities?
a. Biological assets are initially and subsequently measured at fair value.
b. No gain or loss shall be recognized on the initial recognition of a biological asset.
c. Agricultural produce is initially and subsequently measured at fair value
less costs to sell.
d. The gain or loss arising from the initial measurement of biological asset or
agricultural produce is recognized in surplus or deficit.
5. According to the GAM for NGAs, biological assets whose fair value cannot be
reliably determined on initial recognition are measured as follows:
Initial measurement Subsequent measurement
a. fair value less cost to sell fair value less cost to sell
b. cost cost less
accumulated
depreciation
c. cost cost less accumulated
depreciation and impairment
losses
d. fair value less costs to sell cost

Use the following information for the next three questions:


A group of Entity A’s biological assets has a carrying amount of P100,000 before year-
end adjustments. Information at year-end is as follows:

6. If Entity A expects to transact in Active Market #1, how much is the fair value?
a. 130,000
b. 120,000
c. 118,000
d. 123,000

7. If Entity A expects to transact in Active Market #2, how much is the carrying
amount of the biological assets in the year-end statement of financial position?
a. 135,000
b. 132,000
c. 120,000
d. 123,000

8. If Entity A expects to transact in Active Market #1, how much is the gain or
loss from the year-end remeasurement?
a. 18,000
b. 28,000
c. 32,000
d. 23,000
Use the following information for the next two questions:
On January 1, 20x1, Entity A has one 1-year old biological asset with carrying
amount of P1,000.

The following transactions occurred during the period:


a. On July 1, 20x1, one I-year old biological asset is acquired for P1,100, equal to
the FVLCS on this date.
b. On October 1, 20x1, one biological asset is born. The FVLCS of a newborn on
this date is P500.

The FVLCS on December 31, 20x1 are as follows:


Age FVLCS
new born P600
3 mos. old P800
1 yr. old P1,200
1.5 yr. old P1,500
2 yrs. Old P2,000

9. How much is change in FVLCS due to price change?


a. 400
b. 800
c. 1,800
d. 2,400

Asset Group Change in FVLCS


From beg. (1 yr.; 1 yr.) (₱1,200 - ₱1,000) x 1 200
Purchased on July 1 (1 yr.; 1 yr.) (₱1,200 - ₱1,100) x 1 100
Born on Oct. 1 (0; 0) (₱600 - ₱500) x 1 100
Change in FVLCS due to Price Change 400

10.How much is change in FVLCS due to physical change?


a. 600
b. 800
c. 1,600
d. 1,800

Asset Group Change in FVLCS


From beg. (2yrs.; 1yr.) (₱2,000 - ₱1,200) x 1 800
Purchased on July 1 (1.5yrs.; 1yr.) (₱1,500 - ₱1,200) x 1 300
Born on Dec. 31 (3 mos.; 0 yr.) (₱800 - ₱600) x 1 200
FVLCS of new born on Dec. 31 (₱500 x 1) 500
Change in FVLCS due to Physical Change 1,800

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