Fairyland Company purchased dairy cattle at an auction for ₱300,000 on July 1, 2014. Cost of transporting the cattle to the company’s farm was ₱3,000 and the company would have to incur cost similar amount of transportation cost if it was to sell the cattle in the auction, in addition to the auctioneer’s fee of 2% of sales price. On December 31, 2014, after taking into account and location, the fair value of the biological assets had increased to ₱500,000 (that is, the market price including the cost of transporting the asset). What amount should the biological assets be initially recognized?

Fairyland Company purchased dairy cattle at an auction for ₱300,000 on July 1, 2014. Cost of transporting the cattle to the company’s farm was ₱3,000 and the company would have to incur cost similar amount of transportation cost if it was to sell the cattle in the auction, in addition to the auctioneer’s fee of 2% of sales price. On December 31, 2014, after taking into account and location, the fair value of the biological assets had increased to ₱500,000 (that is, the market price including the cost of transporting the asset). What amount should the biological assets be initially recognized?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 10MC

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Goldilocks Farm Company purchased dairy cattle at an auction for ₱300,000 on July 1, 2014. Cost of transporting the cattle to the company’s farm was ₱3,000 and the company would have to incur cost similar amount of transportation cost if it was to sell the cattle in the auction, in addition to the auctioneer’s fee of 2% of sales price. On December 31, 2014, after taking into account and location, the fair value of the biological assets had increased to ₱500,000 (that is, the market price including the cost of transporting the asset).What amount of gain or loss should the company include in the statement of comprehensive income due to the change in the fair value of the biological assets? a.₱193,000 b.₱196,000 c.₱200,000 d.₱209,000
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