Valuation for Biological Assets-Free-Samples -Myassignementhelp

Questions: 1.Distinguish between a Biological asset and an Agricultural Produce. 2.What is the Net Profit of Nerang Orange Farms Ltd for the year ending 30 June 2017? 3.What is the Net Profit for Lynne-Melinda Ltd for the year ending 30 June 2017? Answers: 1.Distinction between biological asset and an agricultural produce AASB 141 Agriculture sets out the accounting for agricultural activities, the conversion of biological assets to agricultural produce (Argils, Garcia, Monllau, 2011). According to this principle, biological assets as living plant and animals like trees in a farm, sheep or cattle into agricultural produce. Consequently, agricultural produce is considered to be the harvested products from the organizations biological assets. Agricultural produce and biological assets that form part of the farming activity are basically recognized firstly at fair value instead of cost. This aspect is for the reason that biological assets are usually not attained via purchase transactions. For instance, prevailing biological assets might yield offspring (Fischer, Marsh, 2013). In organizations that do not attain biological assets, the fair value is considered to be equal to the procurement consideration that is paid. Biological assets in a latitude of AASB 141 are basically evaluated on initial recognition and at consequent dates of reporting at fair value less probable selling cost unless the fair value cannot be consistently measured (Hinke, Starova, 2013). Agricultural harvest is basically measured at fair cost less valued selling costs at the harvesting point. This is because harvested products are considered to be a merchantable commodity and there is no measurement consistency, thus exclusion for produce. (AASB 141.12) A gain on biological assets initial recognition at fair cost less selling costs and variations in fair cost less selling biological assets costs in a period are basically incorporated in the loss or profit by an organization (Bohuov, Svoboda, Nerudov, 2012). A gain on initial recognition as a result of harvesting of agricultural produce at fair cost less selling costs are basically incorporated in loss or profit by a company for the financial year in which it occurs. (AASB 141.28) All the costs that are correlated to biological assets that are basically measured at fair cost are recognized as expenditures when sustained by an organization other than costs to procure biological assets (Burritt, Cummings, 2002). The variation in fair cost of biological assets is considered to be a part unit price change, and part physical change since separate disclosure of the two elements are encouraged but not necessarily needed. Agricultural produces are measured at fair value less selling at yield costs and this measurement is deliberated as the value of the harvest at that period for the purpose of stocks. (AASB 141.13) 2. Nerang Orange Farms Ltd. Journal entries to recognize the harvest of oranges on 30th April 2010 Dr. Inventory Oranges $300,000 Cr. Revenue Harvest of Oranges $150,000 Cr. Cash (Muhammad, Ghani, 2013) $150,000 Net profit Nerang Orange Farm Limited Net profit for the year ending 30 June 2017 US$ US$ Estimated fair value of the orange trees 1500000 Orange trees had a fair value 1,600,000 Oranges sold (310,000) 1,290,000 Cost of sorting, picking, and packing 150,000 (1,440,000) Net profit 60,000 3.Lynne Melinda Ltd (Marsh, Fischer, 2013) Journal entry required on 31st 2009 Dr. Lavander Farm (Asset) $100 000 Cr. Revenue Harvest of Oranges (Muhammad, Ghani, 2013) $90 000 Cr. Cash $10 000 Net profit Lynne Melinda Ltd Net profit for the year ending 30 June 2017 US$ Fair value less costs to sell 100000 Picking costs and delivery charges (10,000) Net profit 90,000 References Argils, J. M., Garcia-Blandon, J., Monllau, T. (2011). Fair Value versus historical cost- based valuation for biological assets: Predictability of financial information.Revista de Contabilidad,14(2), 87-113. Bohuov, H., Svoboda, P., Nerudov, D. (2012). Biological assets reporting: Is the increase in value caused by the biological transformation revenue?Agricultural Economics/Zemedelska Ekonomika,58(11). Burritt, R. L., Cummings, L. S. (2002). Accounting for biological assets-the experience of an Australian conservation company.Asian Review of Accounting,10(2), 17-42. Fischer, M., Marsh, T. (2013). Biological assets: Financial recognition and reporting using us and international accounting guidance.Journal of Accounting and Finance,13(2), 57. Hinke, J., Starova, M. (2013). Application possibilities and consequences of biologicalassets and agricultural produce reporting in accordance with IFRS principles in the Czech Republic.Agris on-line Papers in Economics and Informatics,5(4), 77. Marsh, T., Fischer, M. (2013). Accounting for agricultural products: US versus IFRSGAAP.Journal of Business Economics Research (Online),11(2), 79. Muhammad, K., Ghani, E. K. (2013). A fair value model for bearer biological assets in promoting corporate governance: A proposal.Journal of Agricultural Studies,2(1), 16-26.