Farmland Company produces milk ob 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 farms produce 800,000 kilograms of milk a year and the average inventory held is 15,000 kilograms of milk. However, on December 31, 2019 the entity is currently holding 50,000 kilograms of milk in powder. On December 31, 2019, the biological assets are: Purchased on or before January 1, 2019 (3years old) Purchased on January 1, 2019 Purchased on July 1, 2019 2,100 cows (2 years old) 300 heifers (1.5 years old) 750 heifers No animals were born or sold during the current year. The unit fair value less cost to sell is as follows: January 1, 2019: 1-year old 2-year old July 1, 2019: 1-year old December 31, 2019: 1-year old 2-year old 1.5-year old 3-year old 3,000 4,000 3,000 3,200 4,500 3,600 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. The only region affected by the contaminations was Batangas. However, the cattle in this area were unaffected by the contamination and were healthy. The entity feels that it cannot measure the fair value of the cows in the region because of the problems created by the contamination. There are 600 cows and 200 heifers in the Batangas farm and all these animals had been purchased on January 1, 2019. Required: 1. Determine the fair value of the biological assets on January 1, 2019. 2. Determine the fair value of the biological assets purchased on July 1, 2019. 3. Determine the fair value of the biological assets on December 31, 2019. 4. Determine the change in fair value and indicate the price change and physical change. 5. Explain the measurement of the milk inventory on December 31, 2019.
Farmland Company produces milk ob 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 farms produce 800,000 kilograms of milk a year and the average inventory held is 15,000 kilograms of milk. However, on December 31, 2019 the entity is currently holding 50,000 kilograms of milk in powder. On December 31, 2019, the biological assets are: Purchased on or before January 1, 2019 (3years old) Purchased on January 1, 2019 Purchased on July 1, 2019 2,100 cows (2 years old) 300 heifers (1.5 years old) 750 heifers No animals were born or sold during the current year. The unit fair value less cost to sell is as follows: January 1, 2019: 1-year old 2-year old July 1, 2019: 1-year old December 31, 2019: 1-year old 2-year old 1.5-year old 3-year old 3,000 4,000 3,000 3,200 4,500 3,600 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. The only region affected by the contaminations was Batangas. However, the cattle in this area were unaffected by the contamination and were healthy. The entity feels that it cannot measure the fair value of the cows in the region because of the problems created by the contamination. There are 600 cows and 200 heifers in the Batangas farm and all these animals had been purchased on January 1, 2019. Required: 1. Determine the fair value of the biological assets on January 1, 2019. 2. Determine the fair value of the biological assets purchased on July 1, 2019. 3. Determine the fair value of the biological assets on December 31, 2019. 4. Determine the change in fair value and indicate the price change and physical change. 5. Explain the measurement of the milk inventory on December 31, 2019.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Farmland Company produces milk ob 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 farms produce 800,000 kilograms of milk a year and the average inventory held is 15,000 kilograms of
milk. However, on December 31, 2019 the entity is currently holding 50,000 kilograms of milk in powder. On
December 31, 2019, the biological assets are:
Purchased on or before January 1, 2019 (3years old)
Purchased on January 1, 2019
Purchased on July 1, 2019
2,100 cows
(2 years old)
(1.5 years old)
300 heifers
750 heifers
No animals were born or sold during the current year. The unit fair value less cost to sell is as follows:
January 1, 2019:
1-year old
2-year old
3,000
4,000
July 1, 2019:
1-year old
3,000
December 31, 2019:
1-year old
2-year old
1.5-year old
3-year old
3,200
4,500
3,600
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. The only region affected by the
contaminations was Batangas. However, the cattle in this area were unaffected by the contamination and were
healthy.
The entity feels that it cannot measure the fair value of the cows in the region because of the problems created
by the contamination. There are 600 cows and 200 heifers in the Batangas farm and all these animals had
been purchased on January 1, 2019.
Required:
1. Determine the fair value of the biological assets on January 1, 2019.
2. Determine the fair value of the biological assets purchased on July 1, 2019.
3. Determine the fair value of the biological assets on December 31, 2019.
4. Determine the change in fair value and indicate the price change and physical change.
5. Explain the measurement of the milk inventory on December 31, 2019.
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Step 1: Introduction of biological assets
VIEWStep 2: Requirement 1 - Computation of the fair value of the biological assets on January 1, 2019
VIEWStep 3: Requirement 2 - Computation of the fair value of the biological assets purchased on July 1, 2019
VIEWStep 4: Requirement 3 - Computation of the fair value of the biological assets on December 31, 2019
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