Neat Sheep Enterprises started business on 1 January 2015. On 1 January 2018, 50 Sheep were bought for fair value of ₦750,000. A 2% commission would be charged if they are sold.
Required:
a. Based on IAS 41, how much will the biological asset be sold?
b. Recognise the loss on sale of the biological asset in the statement of profit or loss; and
c. Recognise the biological asset in the statement of financial position.
See the suggested answers to practice activity 16.4 here.
Suggested answers to practice activity 16.4
a. The biological asset will be sold for ₦750,000 less 2% commission.
Commission is 2% of ₦750,000 = ₦15,000
Therefore, the biological asset will be sold for ₦735,000 (that is, ₦750,000 less ₦15,000).
b. Recognition of the loss on sale of the biological asset in the statement of profit or loss:
Neat Sheep Enterprises
Extract of Statement of profit or loss for the year ended 31 December 2018
₦
Loss on biological assets 15,000
c. Recognition of the biological asset in the statement of financial position:
Neat Sheep Enterprises
Extract of Statement of financial position as at 31 December 2018
₦
Biological asset (fair value less costs to sell) 735,000
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