Reference no: EM132804646
Problem - Farmland Company produces milk on its farms. The entity produces 20% of the community's mil bat is consumed. Farmland Company owns five 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, 2014 the entity is currently holding 50,000 kilograms of milk in powder. On December 31, 2014, the herds are:
Purchased on or before January 1, 2014 3 years old 2,100 cows
Purchased on January 1, 2014 2 years old 300 heifers
Purchased on July 1, 2014 1½ 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:
December 31, 2014 July 1, 2014
1-year old 3,200 1-year old 3,000
2-year old 4,500 January 1, 2014
1½ - year old 3,600 1-year old 3,000
3-year old 5,000 2-year old 4,000
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 contamination 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, 2014.
Required -
1. What is the fair value of the biological assets on January 1, 2014?
2. What is the fair value of the acquired biological asset on July 1, 2014?