Question

2.​Welcome Farms Ltd. uses IFRS and has an April 30year-end. Welcome Farms raises beef calves for market. Prepare journal entries for the following:

​On November 30, 2017, the farm purchased 20 calves at a total cost of $2,800. The farm capitalizes feed and labour costs incurred to look after the calves. These costs amount to $175per month.

Account name	Dr	Cr

On April 30, 2018, the calves had a fair value of $4,900. The farm estimated that the calves would mature on October 31, 2018 and that the company would transport the calves to market at an average cost of $50 per calf.

Account name	Dr	Cr

Answer 1

Hey there

Let me help you with this question on Accounting for biological assets. Let us prepare the journal entries to record for the same.

Before that it is important to know that Biological assets within the scope of IAS 41 are measured on initial recognition and at subsequent reporting dates at fair value less estimated costs to sell, unless fair value cannot be reliably measured.

ALso, All costs related to biological assets that are measured at fair value are recognised as expenses when incurred, other than costs to purchase biological assets. So labor and feeding costs will be charged to revenue account and will ot be capitalised.

Journal entries

Biological Asset A/c (Calves)	Dr	2800
To Bank A/c	Cr		2800
(To record purchase of Biological asset)
Labor & Feed Expense	Dr	175
To Bank A/c	Cr		175
(to record labor costs incurred- form month of Dec) Charged to revenue
P&L A/c	Dr	175
Labor & Feed Expense	Cr		175
Biological Asset A/c (Calves)	Dr	1000
To Fair Value Gain A/c			1000
(To record the increase in fair value of asset - (4800-2800-(20*50))