Deck 18: Agriculture

Question 1

Which of the following meets the definition of agricultural produce?

A) Dairy cattle
B) Milk
C) Cheese
D) Yoghurt

Answer 1

B

Question 2

Which of the following is NOT one of the recognition criteria contained within AASB 141 in relation to recognition of a biological asset or agricultural produce as an asset?

A) the asset has physical form
B) the entity controls the asset as a result of past events
C) it is probable that future economic benefits associated with the asset will flow to the entity
D) the fair value or cost can be reliably measured

Answer 2

A

Question 3

Milko owns dairy cattle. The market value of the cattle is calculated by reference to the litres of milk able to be produced and the lactation rate of the cows. The cattle are regularly sold at auction. Costs incurred to transport the cattle to auction are $500 per truck. Each truck can transport approximately 100 cattle.
$\begin{array}{ll}\text { Number of mature cows held at } 30 \text { June } 2013 & 5000 \\\text { Average liters of production per cow } & 6000 \text { liters } \\\text { Lactation rate } & 50 \% \\\text { Price per litre } & 40 \text { cents }\end{array}$
The market value for each cow at 30 June 2013 is:

A) $1000
B) $1195
C) $1200
D) $1205

Answer 3

$1200

Question 4

The entry required when an animal is born on a pig farm is:

A)
DR $\quad$ Biological asset $\quad$$\mathrm { xx }$
CR $\quad$ Profit & Loss $\quad$$\mathrm { xx }$
B)
DR $\quad$ Agricultural produce $\quad$$\mathrm { xx }$
CR $\quad$ Profit & Loss $\quad$$\mathrm { xx }$
C)
DR $\quad$ Profit & Loss $\quad$$\mathrm { xx }$
CR $\quad$ Biological asset $\quad$$\mathrm { xx }$
D)
$\begin{array} { l l l } \text { DR } & \text { Profit \& Loss } & \mathrm { xx } \\& \mathrm { CR } \quad \text { Agricultural produce } & \mathrm { xx }\end{array}$

Question 5

AASB 141 considers that there are three common features to agricultural diversity. Which of the following is NOT one of those features?

A) measurement of change
B) management of change
C) capability to change
D) change transformation

Question 6

Which of the following would be disclosed in the Statement of Financial Position as a biological asset under AASB 141?

A) Vines
B) Picked fruit
C) Cotton
D) Timber

Question 7

At 30 June 2013 the fair value of WineCo's vineyard is $2.5 million. At 30 June 2014 the following information is available:
$\begin{array}{ll}\text { Fair value of vines prior to harvest at 31 March 2014 } & \$ 3,100,000 \\\text { Fair value of grapes harvested at 31 March 2014 } & \$ 500,000 \\\text { Estimated costs to sell - grapes } & \$ 10,000 \\\text { Estimated costs to sell - vines } & \$ 20,000\end{array}$

-
There have been no changes in fair values between 1 April and 30 June 2014.
At 30 June 2014 the vines will be recorded in WineCo's financial statements at an amount of:

A) $2 580 000
B) $2 600 000
C) $2 980 000
D) $3 100 000

Question 8

Fishy Co operates a fish farm. AASB 141 requires live immature fish to be valued at:

A) cost due to the absence of an active market for such fish
B) the fair value less costs to sell based on prices of slaughtered immature fish
C) either cost or fair value less estimated costs to sell
D) fair value determined by applying a discount factor to the fair value of live mature fish.

Question 9

Which of the following require disclosures to be made under AASB 117 and AASB 141?

A) operating and financing leases by lessors and lessees
B) finance leases by lessors and lessees only
C) operating and finance leases by lessees only
D) operating and finance leases by lessors only

Question 10

Which of the following is NOT considered an agricultural activity?

A) oyster farming
B) ocean fishing
C) pearl farming
D) fish farming

Question 11

Which of the following statements is correct in relation to government grants?

A) Government grants for biological assets measured at fair value are accounted for under AASB 141.
B) Government grants for biological assets measured at cost are accounted for under AASB 141.
C) Government grants for biological assets measured at fair value are accounted for under AASB 120.
D) Government grants for biological assets measured at cost are accounted for under AASB 118.

Question 12

Which of the following is NOT a cost to sell?

A) commissions to brokers
B) transfer taxes and duties
C) levies by regulatory agencies
D) transport costs to get assets to a market

Question 13

Agricultural produce is defined in AASB 141 as:

A) a living animal or plant
B) a living product capable of biological transformation
C) the harvested product of the entity's biological assets
D) the detachment of produce from a biological asset or cessation of a biological asset's life processes

Question 14

At 30 June 2013 the fair value of WineCo's vineyard is $2.5 million. At 30 June 2014 the following information is available:
$\begin{array}{ll}\text { Fair value of vines prior to harvest at 31 March 2014 } & \$ 3,100,000 \\\text { Fair value of grapes harvested at 31 March 2014 } & \$ 500,000 \\\text { Estimated costs to sell - grapes } & \$ 10,000 \\\text { Estimated costs to sell - vines } & \$ 20,000\end{array}$

-
The entry to recognise the grapes at the point of harvest is:

A) DR $\quad$ Agricultural produce - grapes $\quad 500000$
CR $\quad$ Biological asset - vines $\quad 500000$
B) $\begin{array} { l l l } \text { DR } \quad \text { Agricultural produce } - \text { grapes } & 510,000 \\\text { CR } \quad \text { Cash } & 10,000 \\\text { CR } \quad \text { Biological asset } - \text { vines } & 500,000\end{array}$
C) DR $\quad$ Agricultural produce - grapes $\quad 500,000$
CR $\quad$ Profit & loss $\quad 500,000$
D) DR $\quad$ Agricultural produce - grapes $\quad 490000$
CR $\quad$ Profit & loss $\quad 490000$

Question 15

AASB 141 requires that biological assets be measured as follows:

A) on initial recognition and at the end of each reporting period at fair value less costs to sell
B) on initial recognition and at the end of each reporting period at its fair value less costs to sell, except where the fair value cannot be measured reliably
C) at fair value-less estimated costs to sell at the point of harvest
D) at fair value less costs to sell at the point of harvest

Question 16

AASB 141 applies to the accounting for the following when they relate to agricultural activity:
I agricultural produce
II biological assets
III land related to agricultural activity
IV government grants

A) I, II and III
B) II, III and IV
C) I, II and IV
D) I, III and IV

Question 17

When determining the fair value of biological assets and there is no market price for that asset in its present condition AASB 141 requires that:

A) the entity uses the present value of expected net cash flows from the asset discounted at a current market-determined pre-tax rate.
B) the entity measure the asset at cost.
C) the entity uses the contract prices for recent sales of similar assets adjusted for the effects of biological transformation.
D) the entity uses sector benchmarks.

Question 18

Increases in fair value over cost in relation to land used for agricultural purposes is recognised in equity when the land is:

A) an investment property measured at fair value and accounted for under AASB 140
B) an investment property measured at cost and accounted for under AASB 140
C) not an investment property, is measured at fair value and accounted for under AASB 116
D) not an investment property, is measured at cost and accounted for under AASB 116

Question 19

AASB 141 requires disclosure of which of the following?
I aggregate gain or loss on initial recognition of biological assets
II fair value of agricultural produce harvested during the period, at point of harvest
III fair value changes attributable to physical changes
IV fair value changes attributable to price changes

A) I and II only
B) I, II and III only
C) II, III and IV only
D) I, II, III and IV

Question 20

Which of the following is NOT a reason as to why the IASC felt that agriculture was an industry that needed its own industry specific standard?

A) the specific exclusion of assets related to agricultural activity from other standards
B) agriculture was considered to be an emerging industry at that time
C) accounting guidelines for agricultural activity previously developed by national standard setters had been piecemeal
D) the nature of agricultural activity had created uncertainty or conflicts when applying traditional accounting models

Question 21

Which of the following is NOT considered to be agricultural produce?

A) timber
B) sugar
C) wool
D) milk

Question 22

Use the following information to answer questions
CowCo is a company that farms dairy cattle. CowCo owns the farmland on which the cattle are located, having purchased it for $1.5 million in 2011. The land is measured at cost under AASB 116.
Details of cattle at 30 June 2013 were as follows:
$\begin{array}{ll}&\text { Cows } & \text { Helfers } \\\text { Number}&900&200\\\text { Fair value (less estimated costs to sell) }&\$800&\$320\end{array}$
During the year ended 30 June 2014 the following occurred:
• 200 new cows were purchased at $810 each
• 50 heifers matured into cows
• 5 heifers died
• 100 cows were sold for $830 each
• The price change between a heifer and a cow at the time of maturity during the year was estimated to be $500

The following is relevant at 30 June 2014:
• The land has been valued at $5.6 million
• Fair value less estimated costs to sell are as follows (CowCo has determined that these are the appropriate fair values to use for the purposes of transfers and deaths of heifers):
o Cows - $850 /head
o Heifers - $350/head


-The fair value of cows as at 30 June 2014 is:

A) $943 250
B) $892 500
C) $875 000
D) $816 500

Question 23

Which of the following is an agricultural product?

A) tea
B) milk
C) coffee
D) fruit juice

Question 24

Use the following information to answer questions
CowCo is a company that farms dairy cattle. CowCo owns the farmland on which the cattle are located, having purchased it for $1.5 million in 2011. The land is measured at cost under AASB 116.
Details of cattle at 30 June 2013 were as follows:
$\begin{array}{ll}&\text { Cows } & \text { Helfers } \\\text { Number}&900&200\\\text { Fair value (less estimated costs to sell) }&\$800&\$320\end{array}$
During the year ended 30 June 2014 the following occurred:
• 200 new cows were purchased at $810 each
• 50 heifers matured into cows
• 5 heifers died
• 100 cows were sold for $830 each
• The price change between a heifer and a cow at the time of maturity during the year was estimated to be $500

The following is relevant at 30 June 2014:
• The land has been valued at $5.6 million
• Fair value less estimated costs to sell are as follows (CowCo has determined that these are the appropriate fair values to use for the purposes of transfers and deaths of heifers):
o Cows - $850 /head
o Heifers - $350/head


-The increase in fair value of livestock attributable to price change is:

A) $76 000
B) $57 000
C) $25 000
D) $6 000

Question 25

Which of the following statements is NOT correct?

A) Management facilitates biological transformation
B) Management is a key part of the definition of agricultural activity under AASB 141
C) There is a link between management and control of a biological asset
D) Management is a key part of the recognition criteria for biological assets and agricultural produce

Question 26

Which standard was issued in 2011 that amended AASB 141?

A) AASB 7
B) AASB 101
C) AASB 118
D) AASB 13

Question 27

According to AASB 13 Fair Value Measurement, the market used to determine fair value should be:

A) the principal market, or, in the absence of a principal market, the relevant market
B) the most advantageous market
C) the relevant market
D) either the principal market, or, in the absence of a principal market, the most advantageous market

Question 28

AASB 141 requires disclosure of which of the following relating to government grants?

A) the nature and extent of grants recognised, unfulfilled conditions attached to the grant and significant increases expected in the level of government grants.
B) the nature and extent of grants recognised, unfulfilled conditions and other contingencies attached to the grant and details of grants applied for but not yet granted
C) unfulfilled conditions and other contingencies attached to the grant and details of grants applied for but not yet granted
D) the nature and extent of grants recognised, unfulfilled conditions and other contingencies attached to the grant and significant decreases expected in the level of government grants.

Question 29

RuralCo received a $100 000 grant from the government on 1 July 2013. One of the conditions attached to the grant was the Rural Co had to continue farming in the same location for the next 2 years, otherwise the grant would have to be retuned in full.
The entry to record the receipt of the grant is:

A) $\begin{array}{llll}\text { DR } & \text { Cash }& 100,000 \\\text { CR }& \text { Revenue }& 100,000 \\\end{array}$
B) $\begin{array} { c l l l } \text { DR } & \text { Cash } &{ 100,000 } \\\text { CR } & \text { Revenue } & 50,000 \\\text { CR } & \text { Performance obligation } & 50,000\end{array}$
C) $\text { DR\quad Cash } \quad 100,000$
$\text { CR\quad Performance obligation } \quad 100,000$
D) No entry required as the grant is conditional and cannot be recognised until the conditions attached to the grant are met.

Question 30

26 It is common for companies applying AASB 141 to:

A) attempt to 'bury' the fair value movements attributable to agricultural assets in 'other expenses'
B) separately disclose the fair value movements attributable to agricultural assets in the statement of profit or loss and other comprehensive income or the notes
C) disclose the fair value movements attributable to agricultural assets as part of 'abnormal' items
D) remain silent in the financial statements about the fair value movements attributable to agricultural assets, but highlight such items in 'financial commentaries'