ExpertMedium2 marksMultiple Choice
ACCA · Question 10 · Agriculture
Section A
Highland Dairies owns a herd of cattle. At the year-end, the fair value of the herd at the local market is $150,000. Auctioneer fees would be 5% of the sales price, and it would cost $5,000 to transport the herd to the market.
At what amount should the herd be measured in the statement of financial position under IAS 41?
Section A
Highland Dairies owns a herd of cattle. At the year-end, the fair value of the herd at the local market is $150,000. Auctioneer fees would be 5% of the sales price, and it would cost $5,000 to transport the herd to the market.
At what amount should the herd be measured in the statement of financial position under IAS 41?
Answer options:
A.
$150,000
B.
$145,000
C.
$142,500
D.
$137,500
How to approach this question
Apply the IAS 41 measurement rule: Fair value less costs to sell. Remember that transport costs are deducted to arrive at fair value, and then costs to sell (like auction fees) are deducted.
Full Answer
D.$137,500✓ Correct
Under IAS 41 Agriculture, biological assets are measured at fair value less costs to sell. Fair value is the market price less transport costs ($150,000 - $5,000 = $145,000). Costs to sell are the auctioneer fees (5% of $150,000 = $7,500). Therefore, carrying amount = $145,000 - $7,500 = $137,500.
Common mistakes
Forgetting to deduct transport costs, or calculating the 5% fee on the post-transport amount.
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