ACCA FR · Chapter 4 · Question 6 of 6
At 1 January Meadow Farm Co owned a dairy herd of 100 cows with a fair value of $900 each. At 31 December their fair value was $1,000 each. During the year 10 calves were born, each with a fair value of $300 at 31 December. Costs to sell are $20 per animal at all dates. No animals were bought or sold. What gain should be recognised in profit or loss for the year under IAS 41?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $12,800
Explanation
Opening herd at FV less costs to sell = 100 x ($900 - $20) = $88,000. Closing herd = 100 x ($1,000 - $20) + 10 calves x ($300 - $20) = $98,000 + $2,800 = $100,800. Gain = $100,800 - $88,000 = $12,800. The gain on the new calves is recognised as part of this figure.
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