Company X purchased 100 goats at an auction for 1,00,000 on 30th September 20X1. Subsequent transportation costs were - 1,000 that is similar to the…

CA Final · Financial Reporting · MTP · September 2025
Company X purchased 100 goats at an auction for 1,00,000 on 30th September 20X1. Subsequent transportation costs were - 1,000 that is similar to the cost X would have to incur to sell the goat at the auction. Additionally, there would be a 2% selling fee on the market price of the goat to be incurred by the seller. On 31st March 20X2, the market value of the goat in the most relevant market increases to 1,10,000. Transportation costs of 1,000 would have to be incurred by the seller to get the goat to the relevant market. An auctioneer's fee of 2% on the market price of the goat would be payable by the seller. On 1st June 20X2, X sold 18 goats for 20,000 and incurred transportation charges of 150. In addition, there was a 2% auctioneer's fee on the market price of the goat paid by the seller. On 15th September 20X2, the fair value of the remaining goat was - 82,820. 42 goats were slaughtered on that day, with a total slaughter cost of 4,200. The total market price of the carcasses on that day was - 48,300, and the expected transportation cost to sell the carcasses is 420. No other costs are expected. On 30th September 20X2, the market price of the remaining 40 goat was - 44,800. The expected transportation cost is 400. Also, there would be a 2% auctioneer's fee on the market price of the goat payable by the seller. Pass Journal entries for the initial and subsequent measurement for all above transactions. Interim reporting periods are of 30th September and 31 March and the company determines the fair values on these dates for reporting.

Suggested Answer and Working Notes:

Value of goat at initial recognition (30th September 20X1) (₹) Biological asset (goat) Dr. 97,000* Loss on initial recognition Dr. 4,000 To Bank (Purchase and cost of transportation on purchase paid by buyer) 1,01,000 (Initial recognition of goat at fair value less costs to sell) *Fair value of goat = 1,00,000 – 1,000 – 2,000 (2% of 1,00,000) = 97,000 Subsequent measurement at 31st March 20X2 (₹) Biological Assets (Goat) Dr. 9,800 To Gain on Sale (Profit & Loss) 9,800 (Subsequent measurement of Goat at fair value less costs to sell (1,06,800** – 97,000)) ** Fair value of goat = 1,10,0000 – 1,000 – 2,200 (2% of 1,10,000) = 1,06,800 Sale of goat on 1st June 20X2 (₹) Biological Assets (Goats) Dr. 226 To Gain on Sale (Profit & Loss) 226 (Subsequent re-measurement of 18 goats at fair value less costs to sell just prior to the point at which they are sold [19,450 - {(1,06,800/100) x 18}]) Cost to Sales (20,000 – 400 {i.e. 2% of 20,000} - 150) Dr. 19,450 To Biological Assets (Goats) 19,450 (Recording a cost of sales figure separately with a corresponding reduction in the value of the biological assets) Bank Dr. 19,450 Selling expenses (150 + 400) Dr. 550 To Revenue 20,000 (Recognition of revenue from sale of goat) Transfer of Goat to Inventory on 15th September 20X2 (₹) Inventory (48,300 - 420) Dr. 47,880 Loss on remeasurement Dr. 1,176 To Biological Asset (Goats) 44,856# To Bank (Slaughtering cost) 4,200 (Transfer of goat to inventory) #Note: 44,856 is calculated as the proportion of goat sold using the fair value [(1,06,800+ 226 – 19,450) x 42/82] Subsequent measurement of goat at 30th September 20X2 (₹) Biological Asset (Goats) Dr. 784 To Gain on remeasurement 784 (Subsequent measurement of goat at fair value less costs to sell [43,504## – {(1,06,800 + 226 – 19,450) – 44,856}] ##Fair value of goat = 44,800 – 400 – 896 (2% of 44,800) = 43,504.

Topics: Ind AS 41

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