Deck 35: Agriculture

Question 1

Whiting Limited operates a fish farm. AASB 141/IAS 41 requires live immature fish to be valued at:

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

Answer 1

C

Question 2

The recognition criteria contained within AASB 141/IAS 41 in relation to recognition of a biological asset or agricultural produce as an asset includes all the following except for:

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

Answer 2

A

Question 3

AASB 141/IAS 41 considers that there are three common features to agricultural diversity. These three features are:
I. Capability to change.
II. Change transformation.
III. Management of change.
IV. Measurement of change.

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

Answer 3

I, III and IV

Question 4

Under AASB 141/IAS 41, which of the following is a biological asset?

A) Fruit trees.
B) Picked fruit.
C) Tinned fruit.
D) Processed fruit.

Question 5

Which of the following is a product resulting from agricultural produce?

A) Milk.
B) Wool.
C) Sugar.
D) Cotton.

Question 6

When determining the fair value of biological assets when there is no market price for that asset in its present condition AASB 141/IAS 41 requires that:

A) the entity uses sector benchmarks.
B) the entity measures 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 the present value of expected net cash flows from the asset discounted at a current market-determined rate.

Question 7

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

A) DR Agricultural produce xx CR Profit and loss xx
B) DR Biological asset xx CR Profit and loss xx
C) DR Profit and loss xx CR Biological asset xx
D) DR Profit and loss xx CR Agricultural produce xx

Question 8

Which of the following are reasons why the IASC felt that agriculture was an industry that needed its own industry specific standard?
I. Agriculture was considered to be an emerging industry at that time.
II. The specific exclusion of assets related to agricultural activity from other standards.
III. The nature of agricultural activity had created uncertainty or conflicts when applying traditional accounting models.
IV. Accounting guidelines for agricultural activity previously developed by national standard setters had been piecemeal.

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

Question 9

AASB 141/IAS 41 requires that biological assets be measured on initial recognition and at the end of each reporting period:

A) at fair value less costs to sell.
B) at fair value less costs to sell at the point of harvest.
C) at fair value less estimated costs to sell at the point of harvest.
D) at fair value less costs to sell, except where the fair value cannot be measured reliably.

Question 10

AASB 141/IAS 41 applies to accounting for which of the following when they relate to agricultural activity?
I. Biological assets.
II. Government grants.
III. Agricultural produce.
IV. Land related to agricultural activity.

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

Question 11

Which standard was issued in 2011 that amended AASB 141/IAS 41?

A) AASB 13 Fair Value Measurement
B) AASB 101 Presentation of Financial Statements
C) AASB 15 Revenue from Contracts with Customers
D) AASB 6 Exploration for and Evaluation of Mineral Resources

Question 12

Which of the following statements is incorrect?

A) Biological transformation is facilitated by management.
B) Management is a key part of the definition of agricultural activity under AASB 141/IAS 41.
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 13

Which of the following meets the definition of agricultural produce?

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

Question 14

At 30 June 2021 the fair value of Green Valley's vineyard is $2.25 million. At 30 June 2022 the following information is available: Fair value of vines prior to harvest at 31 March 2022 $2 400 000
Fair value of grapes harvested at 31 March 2022 $800 000
Estimated costs to sell - grapes $30 000
Estimated costs to sell - vines $40 000
There have been no changes in fair values between 1 April and 30 June 2022.
At 30 June 2022, the vines will be recorded in Green Valley's financial statements at an amount of:

A) $1 450 000.
B) $1 560 000.
C) $2 400 000.
D) $1 600 000.

Question 15

Which of the following is not a cost to sell?

A) Transfer taxes and duties.
B) Levies by regulatory agencies.
C) Transport costs to get assets to a market.
D) Commissions to brokers and dealers.

Question 16

It is common for companies applying AASB 141/IAS 41 to:

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

Question 17

At 30 June 2021, the fair value of Green Valley's vineyard is $2.25 million. At 30 June 2022, the following information is available: Fair value of vines prior to harvest at 31 March 2022 $2 400 000
Fair value of grapes harvested at 31 March 2022 $800 000
Estimated costs to sell - grapes $30 000
Estimated costs to sell - vines $40 000
There have been no changes in fair values between 1 April and 30 June 2022.
The entry to recognise the grapes at the point of harvest is:

A) DR Agricultural produce - grapes 830 000 CR Profit and loss 830 000
B) DR Agricultural produce - grapes 770 000 CR Profit and loss 770 000
C) DR Agricultural produce - grapes 800 000 CR Biological asset - vines 800 000
D) DR Agricultural produce - grapes 830 000 CR Cash 30 000
CR Biological asset - vines 800 000

Question 18

Each of the following are agricultural activities except for:

A) Oyster farming.
B) Pearl farming.
C) Fish farming.
D) Ocean fishing.

Question 19

AASB 141/IAS 41 defines an agricultural activity as the management by an entity of the biological transformation and harvest of biological assets:

A) for sale;
B) into additional biological assets;
C) for conversion into agricultural produce.
D) all of the above.

Question 20

Pure Milk 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 $3000 per truck. Each truck can transport approximately 100 cattle. Number of mature cows held at 30 June 2021 16 000
Average litres of production per cow 10 000 litres
Lactation rate 70%
Price per litre 30 cents
The market value for each cow at 30 June 2021 is:

A) $2000.
B) $2100
C) $3000.
D) $3360.

Question 21

The accounting treatment for land under AASB 116/IAS 16 and AASB 141/IAS 41 differs depending on whether the land is/isn't an investment property. These differences relate to:
I. the recording of changes in fair value.
II. the initial measurement of the value of the land.
III. the subsequent measurement of the value of the land.

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

Question 22

Which of the following is a required disclosure under AASB 141/IAS 41 in relation to government grants?

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

Question 23

With regards to land used for agricultural purposes, increases in fair value over cost is recognised in equity when the land is:

A) an investment property measured at cost and accounted for under AASB 140/IAS 40.
B) an investment property measured at fair value and accounted for under AASB 140/IAS 40.
C) not an investment property, is measured at cost and accounted for under AASB 116/IAS 16.
D) not an investment property, is measured at fair value and accounted for under AASB 116/IAS 16.

Question 24

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

A) Government grants for biological assets measured at cost are accounted for under AASB 41 / IAS 41.
B) Government grants for biological assets measured at fair value are accounted for under AASB 120 / IAS 20.
C) Government grants for biological assets measured at fair value are accounted for under AASB 141/IAS 41.
D) Government grants for biological assets measured at cost are accounted for under AASB 118 / IAS 18.

Question 25

Outback Co received a $360 000 grant from the government on 1 July 2022. One of the conditions attached to the grant was that Outback Co had to continue farming in the same location for the next 3 years; otherwise the grant would have to be returned in full. The entry to record the receipt of the grant on 1 July 2022 is:

A) DR Cash $360 000; CR Revenue $360 000
B) DR Cash $360 000; CR Performance obligation $360 000
C) DR Cash $360 000; CR Revenue $120 000; CR Performance obligation $240 000
D) No entry is required as the grant is conditional and cannot be recognised until the conditions attached to the grant are met.

Question 26

Jersey Co is a company that farms dairy cattle. Jersey Co owns the farmland on which the cattle are located, having purchased it for $3.5 million in 2019. The land is measured at cost under AASB 116/IAS 16. Details of cattle at 30 June 2021 were as follows:
$\begin{array}{ll}&\text { Cows }&\text { Heifers }\\\text { Number } & 1400&200 \\\text { Fair value (less estimated costs to sell) per head } & \$ 590&\$210\end{array}$ During the year ended 30 June 2022 the following occurred:
400 new cows were purchased at $610 each
76 heifers matured into cows
10 heifers died
600 cows were sold for $650 each
The price change between a heifer and a cow at the time of maturity during the year was estimated to be $400. The following is relevant at 30 June 2022:
The land has been valued at $5 million. Jersey Co has determined that the following are the appropriate values to use for the purposes of transfers and deaths of heifers. Fair value less estimated costs to sell:
Cows: $720 / head
Heifers: $300 / head
The increase in fair value of all livestock attributable to price change is:

A) $18 000
B) $182 000
C) $200 000
D) $176 140

Question 27

Which of the following would be disclosed in the statement of financial position as a biological asset under AASB 141/IAS 41?

A) Pigs.
B) Picked fruit.
C) Wine.
D) Grapes.

Question 28

Jersey Co is a company that farms dairy cattle. Jersey Co owns the farmland on which the cattle are located, having purchased it for $3.5 million in 2019. The land is measured at cost under AASB 116/IAS 16. Details of cattle at 30 June 2021 were as follows:
$\begin{array}{ll}&\text { Cows }&\text { Heifers }\\\text { Number } & 1400&200 \\\text { Fair value (less estimated costs to sell) per head } & \$ 590&\$210\end{array}$ During the year ended 30 June 2022 the following occurred:
400 new cows were purchased at $610 each
76 heifers matured into cows
10 heifers died
600 cows were sold for $650 each
The price change between a heifer and a cow at the time of maturity during the year was estimated to be $400. The following is relevant at 30 June 2022:
The land has been valued at $5 million. Jersey Co has determined that the following are the appropriate values to use for the purposes of transfers and deaths of heifers. Fair value less estimated costs to sell:
Cows: $720 / head
Heifers: $300 / head
The fair value of cows as at 30 June 2022 is:

A) $433 840
B) $430 440
C) $413 000
D) $408 000

Question 29

Which of the following are required disclosures under AASB 141/IAS 41?
I. Fair value changes attributable to price changes.
II. Fair value changes attributable to physical changes.
III. Aggregate gain or loss on initial recognition of biological assets.
IV. Fair value of agricultural produce harvested during the period, at point of harvest.

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