Agriculture

Distinction between Biological asset, Agricultural produce, and

Inventory
Use the following information for the next four questions:
The following information pertains to Madagascar Co.
Sheep 500,000 Wool 6,000
Rubber products 10,000 Thread 3,000
Trees in a timber
95,000 Felled trees 8,000
plantation
Maize plants 40,000 Clothing 150,000
Lumber 62,000 Milk 9,000
Pigs 200,000 Carcass 7,000
Roasted peanuts 20,000 Sugar 67,000
Cotton plants 10,000 Harvested cotton 13,000
Peanut plants 5,000 Harvested peanuts 140,000
Sugarcane 25,000 Harvested cane 22,000
Tobacco plants 45,000 Picked leaves 3,000
Tea bushes 800,000 Oil palms 300,000
Dairy cattle 1,000,000 Picked grapes 2,000
Fruit trees 600,000 Picked fruit 10,000
Tea 43,000 Grape vines 2,000,000
Rubber trees 300,000 Harvested latex 10,000
Yarn 22,000 Cured tobacco 320,000
Carpet 33,000 Wine 500,000
Logs 45,000 Processed fruit 20,000
Wheat plants 60,000 Palm oil 50,000
Cheese 75,000 Bean plants 20,000
Sausages 88,000 Cured hams 92,000

1. How much is classified as biological assets that are accounted for under
PAS 41 Agriculture?
a. 2,660,000 b. 2,000,000 c. 6,000,000 d. 2,250,000

2. How much is classified as property, plant and equipment that are

accounted for under PAS 16 Property, Plant and Equipment?
a. 4,000,000 b. 4,860,000 c. 4,560,000 d. 3,650,000

3. How much is classified as agricultural produce?

a. 149,000 b. 248,000 c. 230,000 d. 250,000

4. How much is classified as inventory?

a. 1,480,000 b. 1,600,000 c. 1,540,000 d. 1,880,000
Measurement
Use the following information for the next three questions:
The following information pertains to a biological asset of PETRIFY STUN Co.
Estimated selling price ₱80,000
Commissions to brokers 4,000
Transport costs 2,800
Levies by commodity exchange 1,200
Transfer taxes and duties 2,000
Advertising costs 800

5. How much is the fair value of the biological asset?

a. 80,000 b. 77,200 c. 70,000 d. 69,200

6. How much is the cost to sell of the biological asset?

a. 7,200 b. 10,000 c. 10,800 d. 12,000

7. How much is the valuation of the biological asset in PETRIFY’s statement

of financial position?
a. 80,000 b. 77,200 c. 70,000 d. 69,200

Access to different active markets

8. Information on a biological asset of INSTIGATE PROVOKE Co. is shown
below:
Historical cost ₱40,000
Quoted price in Active Market #1 112,000
Quoted price in Active Market #2 120,000
Costs to sell in either active market 20,000
Contract price 128,000

INSTIGATE Co. is contemplating on transacting in Active Market #1, which is

the principal market for the biological asset. At what amount would the
biological asset be recognized in the year-end financial statements?
a. 92,000 b. 100,000 c. 112,000 d. 120,000

Loss on initial recognition of biological asset

9. On January 1, 20x1, SPAT QUARREL Co. acquired a biological asset at its
fair value of ₱40,000. Necessary costs incurred on the purchase totaled
₱8,000. It was estimated that if the biological asset is to be sold currently,
costs to sell would amount to ₱2,000. How much is the loss recognized on
January 1, 20x1?
a. 38,000 b. 30,000 c. 10,000 d. 0

Gain on initial recognition of biological asset

10. On August 1, 20x1, a dairy cattle of WOO COURT Co. gave birth to a
calf. The fair value less cost to sell of a newly born calf as of August 1,
 20x1 is ₱20,000. Costs incurred to induce procreation such as costs of
artificial insemination, costs of labor and cesarean birth totaled ₱12,000.
How much is the gain recognized on August 1, 20x1?
a. 8,000 b. 12,000 c. 20,000 d. 0

Gain on initial recognition of agricultural produce

11. On April 1, 20x1, HALLOWED SACRED Co. harvested ripe mangoes. The
harvested mangoes have fair value less costs to sell of ₱200,000 on April
1, 20x1. Labor costs incurred in the harvest totaled ₱20,000. The
harvested mangoes are initially recognized at
a. 20,000 b. 180,000 c. 200,000 d. 220,000

Gains or losses on changes in fair value less cost to sell

12. On January 1, 20x1, the biological assets of SUAVE POLISHED Co.
consist of ten 2 year old animals with fair value less cost to sell of ₱40,000
each for a total of ₱400,000.

Transactions during the year include the following:

 One animal aged 2.5 years was purchased on July 1, 20X1 for ₱43,200.
 One animal was born on July 1, 20X1.
 No animals were sold or disposed of during the period.

Per-unit fair values less costs to sell are as follows:

Newborn animal at July 1, 20X1 ₱28,000
2.5 year old animal at July 1, 20X1 43,200
Newborn animal at 31 December 20X1 28,800
0.5 year old animal at 31 December 20X1 32,000
2 year old animal at 31 December 20X1 42,000
2.5 year old animal at 31 December 20X1 44,400
3 year old animal at 31 December 20X1 48,000

How much is the total gain from the change in fair value less costs to sell
during 20x1?
a. 116,800 b. 156,800 c. 113,600 d. 88,800

Biological assets attached to land

13. CANDOR FAIRNESS Co. has the following assets as of December 31,
20x1:
Land held as plantation ₱1,200,000
Trees (planted on the land referred to above) 480,000

The combined market value of the assets is ₱2,000,000 while the market
value of the land is ₱1,280,000, 10% of which is attributable to
improvements on the land. How much is the valuation of the biological
asset?
a. 592,000 b. 720,000 c. 848,000 d. 836,364
THEORY OF ACCOUNTS
1. According to PAS 41 this refers to the management by an entity of the
biological transformation of biological assets for sale, into agricultural
produce, or into additional biological assets.
a. Agricultural activity c. Biological transformation
b. Agricultural management d. Biological activity

2. Agricultural activity covers a diverse range of activities. Such diverse

range of activities have common features which includes all of the
following except
a. Capability to change c. Recognition of change
b. Management of change d. Measurement of change

3. It is the detachment of produce from a biological asset or the cessation of

a biological asset’s life processes.
a. Harvest b. Death c. Decease d. Cultivation

4. When there is a long aging or maturation process after harvest, the

accounting for such products should be dealt with by
a. PAS 41 b. PAS 2 c. PAS 16 d. PAS 40

5. According to PAS41 Agriculture, which of the following would be classified

as a product that is the result of processing after harvest?
a. Cotton b. Wool c. Bananas d. Cheese
(ACCA)

6. Which of the following items would be classified as agricultural produce,

according to PAS41 Agriculture?
a. Tree b. Bush c. Butter d. Apple
(ACCA)

7. According to PAS41 Agriculture, which of the following items would be

classified as biological assets?
I. Oranges
II. Chickens
III. Eggs
IV. Trees
a. I, II b. III, IV c. II, IV d. I, IV
(ACCA)
8. Are the following statements about classification according to PAS 41
Agriculture true or false?
I. Sugar should be classified as agricultural produce.
II. Wool should be classified as agricultural produce.
a. False, False b. False, True c. True, False d. True, True
(ACCA)

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

a. The accounting for biological assets.
b. The initial measurement of agricultural produce harvested from the
entity’s biological assets.
c. The processing of agricultural produce after harvesting.
d. The accounting treatment of government grants received in respect of
biological assets.
(Adapted)

10. Which of the following is correct regarding the applicability of PAS 41?
a. PAS 41 applies to biological assets and agricultural produce at the
point of harvest even if they do not relate to agricultural activities.
b. PAS 41 applies to unconditional government grant related to biological
assets measured at cost.
c. PAS 41 applies to land on which tree recognized as biological assets
are planted.
d. PAS 41 applies to living plants and animals only when such items
relate to agricultural activity.

11. PAS 41 applies to which of the following when they relate to

agricultural activity
I. Biological assets
II. Agricultural produce after the point of harvest
III. Agricultural produce at the point of harvest
IV. An unconditional government grant related to a biological asset
measured at its fair value less costs to sell
V. An unconditional government grant related to a biological asset
measured at cost land related to agricultural activity
VI. Intangible assets related to agricultural activity
a. I, II, IV b. I, III, IV c. I, II, III, IV, V d. I, II, IV, VI

12. According to PAS 41 this refers to the harvested product of the entity’s
biological assets.
a. biological produce c. agricultural produce
b. agricultural products d. biological assets

13. It is a living animal or plant

a. biological product c. agricultural product
 b. biological asset d. mutant assets

14. It comprises the processes of growth, degeneration, production, and

procreation that cause qualitative or quantitative changes in a biological
asset.
a. agricultural activity c. genetic mutation
b. biological activity d. biological transformation

15. Agricultural activity covers a diverse range of activities which includes

all of the following except
a. processing of grapes into wine by a vintner who has grown the grapes.
b. raising livestock, forestry, and annual or perennial cropping
c. cultivating orchards and plantations
d. floriculture and aquaculture (including fish farming).

16. Agricultural activity may include

a. ocean fishing c. animal hunting in the forest
b. deforestation d. fish pond operation

Initial and subsequent measurement

17. According to PAS41 Agriculture, which of the following criteria must be
satisfied before a biological asset can be recognized in an entity's
financial statements?
I. The entity controls the asset as a result of past events
II. It is probable that economic benefits relating to the asset will flow to
the entity
III. An active market for the asset exists
IV. The asset forms a homogenous biological group
a. I, II b. I, II, IV c. I, II, III d. I, II, III, IV
(ACCA)

18. Biological assets and agricultural produce are initially recognized at

a. cost c. fair value less costs to sell
b. fair value d. lower of cost or fair value less costs to sell

19. According to PAS41 Agriculture, which of the following expenses would

be classified as costs to sell when valuing biological assets and
agricultural produce?
I. Commissions to brokers
II. Transport costs
III. Transfer taxes and duties
IV. Advertising costs
a. I, II, III b. III, IV c. I, III d. I, III, IV
(ACCA)
20. Regarding the choice of measurement basis used for valuing biological
assets, PAS 41
a. Sets out several ways of measuring fair value.
b. Recommends the use of historical cost.
c. Recommends the use of current cost.
d. Recommends the use of present value.
(Adapted)
21. Where the fair value of the biological asset cannot be determined
reliably, the biological asset is measured at
a. Cost.
b. Cost less accumulated depreciation.
c. Cost less accumulated depreciation and accumulated impairment
losses.
d. Net realizable value.

22. Generally speaking, biological assets relating to agricultural activity

should be measured using
a. Historical cost.
b. Historical cost less depreciation less impairment.
c. A fair value approach.
d. Net realizable value.
(Adapted)

23. Which of the following values is unlikely to be used in fair value

measurement of a biological asset?
a. Quoted price in a market.
b. The most recent market transaction price.
c. The present value of the expected net cash flows from the asset.
d. External independent valuation.
(Adapted)

24. The Plants Vs. Zombies Company owns a number of herds of cattle.
Where should changes in the fair value of a herd of cattle recognized in
the financial statements, according to PAS 41 Agriculture?
a. In profit or loss only
b. In other comprehensive income only
c. In profit or loss or other comprehensive income
d. In the statement of cash flows only
(ACCA)

25. An entity had a plantation forest that is likely to be harvested and sold
in 30 years. The income should be accounted for in which of the following
way?
a. No income should reported annually until first harvest and sale in 30
years
 b. Income should be measured annually and reported using a fair value
approach that recognizes and measures biological growth.
c. The eventual sale proceeds should be estimated and matched to the
profit and loss account over the 30 year period.
d. The plantation forest should be valued every 5 years and the increase
in value should be shown in the statement of recognized gains and
losses
(Adapted)

26. When agricultural produce is harvested, the harvest should be

accounted for by using PAS 2 Inventories, or another applicable PFRS. For
the purpose of that Standard, cost at the date of harvest is deemed to be
a. the fair value less cost to sell at point of harvest.
b. the historical cost of the harvest.
c. the historical cost less accumulated impairment losses.
d. market value.

27. A gain or loss arising on the initial recognition of a biological asset and
from a change in the fair value less costs to sell of a biological asset
should be included in
a. The net profit or loss for the period.
b. The statement of recognized gains and losses.
c. A separate revaluation reserve.
d. A capital reserve within equity.
(Adapted)

28. Land that is related to agricultural activity is valued

a. At fair value.
b. In accordance with PAS 16, Property, Plant and Equipment, or PAS 40,
Investment Property
c. At fair value in combination with the biological asset that is being
grown on the land.
d. At the resale value separate from the biological asset has been grown
on the land.
(Adapted)

29. Which of the following costs are not included in costs to sell?
a. Commissions to brokers and dealers.
b. Levies by regulatory agencies.
c. Transfer taxes and duties.
d. Transport and other costs necessary to get the assets to a market.

30. In relation to PAS 41, which of the following is the least desirable
choice of income recognition?
a. Recognition of income during production
b. Recognition of income when a sale occurs
c. Recognition of income only when cash is collected
d. Recognition of income when production is completed