Question

Pastorall Ltd is an Australian pastoral company. It recently acquired a beef cattle farm near Gunnedah, New South Wales. The following assumptions apply:

The company was created as at 1 November 2022; at that time, 1100 baby cattle (calves) and 700 mature cattle were acquired. The cost of acquisition for each unit of baby cattle (calf) and mature cattle is the same as the costs to sell in the table below

Calves becomes mature after six months.

On 28 February 2023, 500 calves were born.

On 30 May 2023, 900 mature cattle were sold.

The fair value for the baby cattle (calves) and the mature cattle as well as costs to sell is as follows:

Fair value per baby cattle (calf) per unit
2022- $26
2023-$30

Fair value per mature cattle per unit
2022-$36
2023-$40

Costs to sell or acquisition cost

Auctioneer’s fee
2022-$1.5
2023-2.0

Required

Provide journal entries for the following items according to the requirement of IAS 41 Agriculture:

Establishment of the cattle farm on 1 November 2022

New born calves on 28 February 2023

Sale of mature cattle on 30 May 2023

The fair value change of the calves and the mature cattle as at 30 June 2023

that is all the data

Answer 1

SOLUTION:

As per IAS 41, Biological assets are measured at Fair value less cost to sell at the time of both initial recognition &
subsequent recognition. Accordingly journal entries follow:
a)	For initial recognition:
Date	Account Title & Explanation	Debit ($)	Credit ($)
Nov 1, 2022	Biological Asset {[(26-1.5)*1100]+[(36-1.5)*700]}	51100
	Loss on initial recognition		51100
	To Bank
	(To record purchase of Biological Asset.)
b)	Entry for New born calves on 28 February 2023 recorded at fair value less cost to sell
Date	Account Title & Explanation	Debit ($)	Credit ($)
Feb 28, 2023	Biological Asset [(30-2)*500]	14000
	To Gain on initial recognition		14000
	(To record for 500 calves born)
c)	Entry for Sale of mature cattle on 30 May 2023
Date	Account Title & Explanation	Debit ($)	Credit ($)
May 30, 2023	Bank [(40-2)*900]	34200
	Selling Expenses (2*900)		1800
	To Revenue		32400
	(To record sale of 900 mature cattles)
d)	Entry for fair value change of the calves and the mature cattle as at 30 June 2023
Date	Account Title & Explanation	Debit ($)	Credit ($)
Jun 30, 2023	Loss on re-measurement of Biological Asset {51100 - [(40-3)*900]}	17800
	To Biological Asset		17800
	(To record fair value change)
	WN: Number of cattles matured for fair value change as on June 30, 2023.
		No. of calves	No. of cattles
	Purchase of Nov 1, 2022	1100	700
	New calves born on Feb 28, 2023	500
	Baby cattle matured on May 1, 2023	-1100	1100
	Sale of mature cattles on May 30, 2023		-900
	Total	500	900