AB Ltd commenced business in January 2017. The purpose of the business was to carry out animal husbandry. AB Ltd purchased and developed 10 plots of land to breed and sell sheep. The land was bought for ₦5 million in August 2016. The cost of erecting two farm offices and one warehouse was ₦10 million. The cost is composed as follows:
₦
2 farm offices 7,000,000
1 warehouse 3,000,000
As at December 2017, the following information was extracted from the books of AB Ltd:
₦
Motor van 1,000,000
Furniture and fittings 500,000
Plant and machinery 500,000
Milk extractor machine 250,000
Biological assets:
Sheep 3,150,000
Sheep held for slaughter 1,000,000
Labourers’ wages 300,000
Sheep feed expenses:
Grass 10,000
Legumes 15,000
Forbs 3,000
Hay 8,000
Grain 15,000
Sale of sheep 5,400,000
Veterinary Doctor 500,000
Milk replacer – Colostrum 150,000
Petrol and Diesel 70,000
Electricity 57,000
Rental income 6,000,000
Insurance 550,500
Trade receivables 200,000
Cash at bank 7,409,000
Purchases of mature sheep 800,000
Ordinary share capital 21,550,000
Trade payables 300,000
Additional information:
a. Sheep, 75 in number, were valued at ₦2,000,000 on 1 January 2017. Some of the sheep were carrying their young. Upon recognition of 100 biological assets on 31 December 2017, the fair value less costs to sell, approximately determined, amounted to ₦41,500 per sheep. There are no costs to sell the sheep in the market. Some sheep gave birth to lambs and it was determined that their initial recognition in the financial statements should be valued at fair value less costs to sell of ₦41,500.
b. Of the biological assets, mature sheep were valued at ₦2,656,000.
Lambs were valued at ₦494,000.
Sheep held for sale amounted to ₦1,000,000.
c. Depreciation rates are as follows:
Buildings 20%
Motor van 20%
Furniture and fittings 20%
Plant and machinery 15%
Milk extractor machine 15%
d. There are no impairment losses relating to Property, Plant and Equipment.
e. Tax for the year is ₦2,912,500.
You are required to prepare the statements of:
i. Profit or loss for the year ended 31 December 2017; and
ii. Financial position as at 31 December 2017.
See the suggested answers to practice activity 16.10 here.
Suggested answers to practice activity 16.10
i.
ii.
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