question archive During 2018, you were engaged to audit Karen Farms Incorporation who produces milk from its farm
During 2018, you were engaged to audit Karen Farms Incorporation who produces milk from its farm
Subject:AccountingPrice: Bought3
During 2018, you were engaged to audit Karen Farms Incorporation who produces milk from its farm. The company produces 20% of the community's milk that it consumed while owning 5 farms and had a stock of 2,100 cows and 1,050 heifers. The farm produces 800,000 kilograms of milk a year and the average inventory held is 15,000 kilograms of milk. However, on December 31, 2018, the entity is currently holding 50,000 kilograms of powdered milk. On December 31, 2018, the biological assets are as follows:
Purchased before January 1, 2018 Purchased on January 1, 2018
Purchased on July 1, 2018
No animals were born or sold during the current year. The unit fair value less costs to sell are as follows:
January 1, 2018
1 year old Php 3,000 2 year old Php 4,000
July 1, 2018
3 years old 2 years old 1.5 years old
2,100 cows 300 heifers 750 heifers
1 year old December 31, 2018
1 year old
2 year old 1.5 year old 3 year old
Php 3,000
Php 3,200 Php 4,500 Php 3,600 Php 5,000
The entity has had problems during the year. Contaminated milk was sold to customers. As a result, milk consumption had gone down. The entity business spread over different parts of the country. The only region affected by the contamination was in Pangasinan. However, the cattle in this area were unaffected by the contamination and were found 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 farm and all of these animals had been purchased on January 1, 2018.
Questions: Based on the above facts, compute for the following:
1. What is the fair value of biological assets on January 1, 2018?
2. What is the fair value of biological assets purchased on July 1, 2018?
3. What is the fair value of the biological assets on December 31, 2018?
4. What is the increase in the fair value of biological assets on December 31, 2018?
5. What is the increase in fair value of biological assets due to physical change?
6. What is the increase in fair value of biological assets due to price change?
