FORESTER COMPANY

AFRICA COMPANY

Forester Company has reclassified certain assets as

biological assets. The total value of forest assets is
P6,000,000 which comprises P5,100,000
freestanding trees, P600,000 land under trees and
P300,000 roads in forest .

Africa Company purchased 2000 llamas at the

begging of current year. These llamas will be
sheared semiannually and their wool sold to
specialty clothing manufactures. The llamas were
purchased for P5,000,000. During the current year,
the change in fair value due to growth and price
changes is P350,000, the wool harvested but not
yet sold is valued at net realizable value of
P100,000, and the decrease in fair value due to
harvest is P50,000.

What amount should be reported as biological

assets?
a.) 5,100,000
b.) 5,700,000
c.) 5,400,000

What is the carrying amount of the biological asset

at year-end?

d.) 6,000,000

a.) 5,300,000

Land under trees and roads in forest should be

classified as property, plant, and equipment.

b.) 5,400,000
c.) 5,400,000
d.) 5,100,000

SOLUTION
Llamas purchased

P5,000,000

Change in fair value

350,000

Wool harvested but not yet sold

100,000

Decrease in fair value

(50,000)

Biological assets

5,400,000

TEMERITY COMPANY
Temerity Company has different kinds of farm
animals on January 1, 2015.
During the current year, several acquisitions
occurred related to these farm animals.
A detailed of these transactions is as follows:
Carrying amount on January 1:
15 Horses
10 Dairy Cattle
8 Carabaos
20 Hogs

(1
(2
(2.5
(3

year old)
years old)
years old)
years old)

1,000,000
400,000
200,000
500,000

Purchases on June 30:

4 Dairy Cattle
6 Carabaos

(1
(6

year old)
months old)

150,000
100,000

1. What is the carrying amount of the biological

assets on December 31?
a.) 3,160,000
b.) 2,350,000
c.) 2,800,000
d.) 2,380,000
15 Horses
10 Dairy cattle
8 Carabaos
20 Hogs
Carrying amount-Jan 1
Purchases
4 Dairy Cattle
6 Carabaos
Total Biological Assets

1,000,000
400,000
200,000
500,000
2,100,000
150,000
100,000
2,350,000

Fair value less cost of disposal on December 31:

15 Horses
10 Dairy cattle
8 Carabaos
20 Hogs
4 Dairy cattle
6 Carabaos

(1
(2
(2.5
(3
(1
(6

year old)
years old)
years old)
years old)
year old)
months old)

1,200,000
520,000
250.000
550,000
170,000
110,000

2. What is the gain from change in fair value

attributable to price change?
a.) 810,000
b.) 450,000
c.) 360,000
d.) 0

Fair value less cost of disposal in December 31:

15 Horses
10 Dairy cattle
8 Carabaos
20 Hogs
4 Dairy cattle
6 Carabaos

(2
(3
(3.5
(4
(1.5
(1

years old)
years old)
years old)
years old)
years old)
year old)

1,350,000
580,000
290.000
600,000
200,000
140,000

There were no farm animals sold during the year

and neither wee there any neither newborns nor
deaths.

3.) What is the gain from changes in fair value

attributable to physical change?
a.) 810,000
b.) 450,000
c.) 360,000
d.) 700,000