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Section B - Case 3: AgriCorp
Scenario: AgriCorp owns vineyards and a grape processing plant. On 1 January 20X4, the carrying amount of the grapevines (bearer plants) was $5,000,000. The fair value of the grapes growing on the vines was $500,000. On 31 December 20X4, AgriCorp harvested the grapes. The fair value less costs to sell of the harvested grapes was $800,000.
On 1 January 20X4, AgriCorp received a government grant of $1,000,000 to purchase a specialized eco-friendly tractor costing $4,000,000. The tractor has a useful life of 5 years. AgriCorp accounts for grants by deducting them from the carrying amount of the asset.
AgriCorp also holds a portfolio of corporate bonds purchased for $2,000,000 on 1 January 20X4. The business model is to hold the bonds to collect contractual cash flows (principal and interest). At 31 December 20X4, the 12-month expected credit loss (ECL) is $50,000, and the lifetime ECL is $200,000. There has been no significant increase in credit risk since initial recognition.
Question: How should the grapevines (bearer plants) be accounted for in AgriCorp's financial statements?
ACCA · Question 27 · Agriculture
Section B - Case 3: AgriCorp
Scenario: AgriCorp owns vineyards and a grape processing plant. On 1 January 20X4, the carrying amount of the grapevines (bearer plants) was $5,000,000. The fair value of the grapes growing on the vines was $500,000. On 31 December 20X4, AgriCorp harvested the grapes. The fair value less costs to sell of the harvested grapes was $800,000.
On 1 January 20X4, AgriCorp received a government grant of $1,000,000 to purchase a specialized eco-friendly tractor costing $4,000,000. The tractor has a useful life of 5 years. AgriCorp accounts for grants by deducting them from the carrying amount of the asset.
AgriCorp also holds a portfolio of corporate bonds purchased for $2,000,000 on 1 January 20X4. The business model is to hold the bonds to collect contractual cash flows (principal and interest). At 31 December 20X4, the 12-month expected credit loss (ECL) is $50,000, and the lifetime ECL is $200,000. There has been no significant increase in credit risk since initial recognition.
Question: What is the initial cost of the harvested grapes when transferred to inventory under IAS 2?
Section B - Case 3: AgriCorp
Scenario: AgriCorp owns vineyards and a grape processing plant. On 1 January 20X4, the carrying amount of the grapevines (bearer plants) was $5,000,000. The fair value of the grapes growing on the vines was $500,000. On 31 December 20X4, AgriCorp harvested the grapes. The fair value less costs to sell of the harvested grapes was $800,000.
On 1 January 20X4, AgriCorp received a government grant of $1,000,000 to purchase a specialized eco-friendly tractor costing $4,000,000. The tractor has a useful life of 5 years. AgriCorp accounts for grants by deducting them from the carrying amount of the asset.
AgriCorp also holds a portfolio of corporate bonds purchased for $2,000,000 on 1 January 20X4. The business model is to hold the bonds to collect contractual cash flows (principal and interest). At 31 December 20X4, the 12-month expected credit loss (ECL) is $50,000, and the lifetime ECL is $200,000. There has been no significant increase in credit risk since initial recognition.
Question: What is the initial cost of the harvested grapes when transferred to inventory under IAS 2?
Answer options:
$500,000
$800,000
$300,000
$0
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