In: Accounting
INTERMEDIATE ACCOUNTING
1. Maxpein Company has reclassified certain assets as biological
assets. The
total value of the forest assets is P6, 000,000 which
comprises:
Freestanding trees | 5,100,000 |
Land under trees | 600,000 |
Roads in forests 6,000,000 |
300,000 |
In the statement of financial portion, what total amount of the
forest assets
should be classified as biological assets?
2.Naih Company is a producer of coffee. The entity is considering
the valuation
of harvested coffee beans. Industry practice is to value the coffee
beans at
market value and uses as reference a local publication “Accounting
for
Successful Farms”
On December 31, 2014, the entity has harvested coffee beans costing
P3,
000,000 and with fair value less cost of disposal of P3, 500,000 at
the point
harvest.
Because of long aging and maturation process after harvest, the
harvested
coffee beans were still on hand on December 31, 2015. On such date,
the fair
value less cost of disposal is P3, 900,000 and the net realizable
value is P3,
200,000.
What is the measurement of the coffee beans inventory on December
31, 2014?
3.On August 1, 2006, Bamco Company purchased a new machine on a
deferred
payment basis. A down payment of P100,000 was made and 4
montly
installments of P250,000 each are to be made beginning on September
1, 2006.
The cash equivalent price of the machine was P950,000. Bamco
incurred and
paid installation costs amounting to P30,000.
The amount to be capitalized as the cost of the machine is
a. 950,000 b. 980,000 c. 1,100,000 d. 1,130,000
4. On April 30, 2019, Shark Corporation purchased for P 30 per
share all 200,000
of Fins Corporation’s outstanding ordinary share. On this date,
Fin’s balance sheet
showed net assets of P 5,000,000. Additionally, the fair value of
Fin’s identifiable
assets on the same date was P600,000 in excess of their carrying
amount.
What amount should Shark report as goodwill in its April 30, 2019
consolidated
balance sheet?
1.
As per IAS 41, A biological asset is a living animal or plant.
By applying the above definition, Land under trees and Roads in the forest are not biological assets.
Thus, In the statement of the financial position, The total
amount of the forest assets
should be classified as biological assets is P5,100,000 of
freestanding trees.
Land under trees and Roads in the forest are to be dealt under IAS 16 - Property, Plant, and Equipment.
2.
measurement of the coffee beans inventory on December 31, 2014, = P3,500,000
Produce grown on a bearer plant is a biological asset so coffee beans are biological assets.
As per IAS 41(12), a biological asset shall be measured on initial recognition and at the end of each reporting period at its fair value less costs to sell. So, Fair value less costs to sell of P3,500,000 is the initial measurement value of coffee beans on December 31, 2014.
3.
b is correct. P980,000 to be capitalized.
Here, the cash equivalent price is to be taken as the cost of the machine. The additional amount of P150,000 (P1,100,000 - P950,000) is interest for deferred payments and should not be capitalized because the machine is operational when it is acquired. Amount incurred for operationalizing the machinery at the installation stage is to be capitalized.
Based on the above logic, answers a,c and d are incorrect.
4.
Total Consideration paid = 200,000 * 30 = P6,000,000
Fair value of Fin's corporation assets (5,000,000 + 600,000) = P5,600,000
Goodwill = 6,000,000 - 5,600,000 = P400,000
P400,000 to be reported as goodwill in the consolidated balance sheet.