Deck 22: Accounting for Agricultural Activity

Question 1

Agricultural assets that are plants or trees are most appropriately measured for accounting purposes at:

A) net realisable value
B) replacement cost
C) net present value
D) historical cost

Answer 1

A

Question 2

The accounting treatment of government grants under AASB 141 requires that:

A) unconditional grants are to be treated as non-current assets when they become receivable
B) unconditional grants are to be treated as income when they become receivable
C) unconditional grants are to be treated as income
D) none of the above

Answer 2

B

Question 3

AASB 141 requires that biological assets be measured at net realisable value that is:

A) fair value less estimated point of sale costs
B) fair value less point of sales costs
C) fair value
D) none of the above

Answer 3

A

Question 4

Which of the following statements about a growing crop expected to be sold within the next reporting cycle is not true?

A) It should never be classified as inventory
B) It should always be classified as a current asset
C) It should always be classified as inventory
D) It is in the process of production

Question 5

Alton Downs Ltd has an orchard of citrus trees with an estimated net realisable value at 1 January 20X1 of $1 600 000.During the year ended 31 December 20X1 fruit with an estimated fair value of $300 000 was picked.The fruit was still on hand at the end of the year.Estimated sales commission on this fruit was .Costs of picking,sorting,packing and storage totalled $125 000.The fruit was sold in 20X2 (after the 20X1 financial statements were prepared)for $430 000.On 31 December 20X1 the orange orchard had an estimated net realisable value of $1 550 000.The fruit on hand at 31 December 20X2 should be valued at:
$$\$ 25000$$

A) $300 000
B) $275 000
C) $125 000
D) $475 000

Question 6

Agricultural activity under the heading of Biological assets such as animals is most appropriately measured for accounting purposes at:

A) standard value
B) net realisable value
C) discounted market value
D) historical cost

Question 7

In what ways is agricultural activity different from other forms of assets? In what ways are they similar to other forms of assets? How do these differences,and similarities,affect accounting for agricultural activity?

Question 8

Applying fair value to agricultural activity is assumed on the basis that it can be measured reliably.What do you think could potentially cause an asset's measurement to be unreliable,and why? How detailed should be the disclosure of any inherent unreliability?

Question 9

Agricultural activity should:

A) sometimes be classified as non-current assets
B) always be classified as current assets
C) always be classified as non-current assets
D) always be classified as inventories

Question 10

Describe the sustained-yield method and the standard method of measuring forestry assets.

Question 11

Australian Accounting Standard AASB '141 Agricultural Activity' requires disclosure of the following items of information:

A) the method of calculating the replacement cost of biological assets
B) the basis for classifying biological assets either as inventory or as plant and equipment
C) the nature of biological assets, including their physical quantity
D) all of the above

Question 12

List three significant items of information that Australian Accounting Standard AASB 141 'Agricultural Activity' requires to be shown in the annual report and financial statements specifically of a primary production business.Explain why disclosure of each of these items is considered to provide useful information to investors.

Question 13

Which of the following activities do not fall under the auspices of AASB 141?

A) Circus animals
B) Greyhounds and horses held for racing
C) Investment in a carbon sink
D) All of the above

Question 14

On 1 September 20XX,Beuno Vista Ltd purchased an established forest for a total cost of $2 000 000.During the year ended 30 June 20XX,Beuno Vista spent $300 000 on maintaining the forest and $100 000 on office administration costs.In March 20XX,the company cut logs from the forest that had an estimated net realisable value of $800 000.Costs of logging were $150 000.The logs were sold in June 20XX for .On 30 June 20XX the forest had an estimated net realisable value of $1 300 000.The total profit (or loss)from operations for the year ended 30 June 20XX is:
$$\$ 850000$$

A) $400 000 Profit
B) $(400 000) Loss
C) $350 000 Profit
D) $700 000 Profit

Question 15

Greenview Dreams Ltd has an orchard of mango trees with an estimated fair value at 1 January 20X1 of $1 600 000.During the year ended 31 December 20X1 mangoes with a fair value of $300 000 were picked and they were still on hand at the end of the year.Costs of picking,sorting,packing and storage totaled $125 000.The mangoes were sold later in 2012 for $430 000.On 31 December 20X1 the mango orchard had an estimated net realisable value of $1 750 000.The total profit from operations for the 20X1 year is:

A) $325 000
B) $305 000
C) $575 000
D) $425 000

Question 16

At the beginning of the 20X1 financial year,Vaughn Downs Ltd owned a forest with an estimated net realisable value of $8 000 000.During the year,Vaughn Downs spent $300 000 on general administration costs and $400 000 on maintaining and improving the forest.Also during the year the company felled some timber from the forest that had an estimated net realisable value of $3 000 000.Costs of felling and treating the timber amounted to $800 000.The timber was sold later in the year for $3 100 000.At the end of the year,the forest had an estimated net realisable value of $8 700 000.The financial statements for the year should report:

A) a profit from operations of $1 700 000 and an increase in the revaluation surplus of $700 000
B) a profit from operations of $1 700 000
C) a profit from operations of $2 100 000 and an increase in the revaluation surplus of $300 000
D) a profit from operations of $2 300 000