ExpertMedium2 marksMultiple Choice
ACCA · Question 22 · Agriculture
SECTION B - CASE 2: BioHarvest Agri
BioHarvest Agri Co operates commercial vineyards. The year-end is 30 September 20X6.
On 15 September 20X6, BioHarvest harvested 100 tonnes of grapes. The fair value of the grapes at the point of harvest was $2,000 per tonne. Estimated costs to sell were $100 per tonne. The actual cost of harvesting was $50 per tonne.
At what value should the harvested grapes be initially recognized on 15 September 20X6?
SECTION B - CASE 2: BioHarvest Agri
BioHarvest Agri Co operates commercial vineyards. The year-end is 30 September 20X6.
On 15 September 20X6, BioHarvest harvested 100 tonnes of grapes. The fair value of the grapes at the point of harvest was $2,000 per tonne. Estimated costs to sell were $100 per tonne. The actual cost of harvesting was $50 per tonne.
At what value should the harvested grapes be initially recognized on 15 September 20X6?
Answer options:
A.
$200,000
B.
$190,000
C.
$185,000
D.
$5,000
How to approach this question
Apply the IAS 41 measurement rule for agricultural produce at the point of harvest: Fair Value less Costs to Sell. Ignore actual incurred costs for this valuation.
Full Answer
B.$190,000✓ Correct
Under IAS 41, agricultural produce harvested from an entity's biological assets is measured at its fair value less costs to sell at the point of harvest. Fair value ($2,000) - Costs to sell ($100) = $1,900 per tonne. 100 tonnes * $1,900 = $190,000. This value becomes the 'cost' for the purpose of IAS 2 Inventory going forward.
Common mistakes
Deducting the actual harvesting costs ($50) from the fair value.
Practice the full ACCA FR — Financial Reporting Practice Exam 1
32 questions · hints · full answers · grading
More questions from this exam
Q01SECTION A
According to the IASB's Conceptual Framework for Financial Reporting, which of the fol...EasyQ02SECTION A
CloudStream Co, a software-as-a-service (SaaS) provider, enters into a contract with a...MediumQ03SECTION A
On 1 January 20X4, Titan Manufacturing Co acquired a specialized heavy-duty press for ...HardQ04SECTION A
Under IAS 36 Impairment of Assets, which of the following is an internal indicator of ...EasyQ05SECTION A
On 1 July 20X6, LogisticsPro Co entered into a sale and leaseback transaction for a fl...Hard