Question

E9.7 (LO2) (Valuation at Net Realizable Value) Matsumura Dairy began operations on April 1, 2019, with the purchase of 200 milking cows for ¥6,700,000. It has completed the first month of operations and has the following information for its milking cows at the end of April 2019 (yen in thousands). Milking cows Change in fair value due to growth and price changes Decrease in fair value due to harvest Milk harvested during April 2019 (at net realizable value) (200,000) (12,000) 72,000 Due to a very high rate of calving in the past month, there is a glut of milking cows on the market. Instructions a. Prepare the journal entries for Matsumura's biological asset (milking cows) for the month of April 2019. b. Prepare the journal entry for the milk harvested by Matsumura during April 2019. c. Matsumura sells the milk harvested in April on the local milk exchange and receives M74,000. Prepare the summary journal entry to record the sale of the milk.

Answer 1

In the books of Matsumura Paie :- A Journal entries for Matsurnura's Biologic assets :- se Milking . 1104/19 Cours Bank Al Ak # 61,00,000 * 67.00 000 ( Being Cows Purchased) -30/04/19 ③ 2,00.000 € 2,00,000 Dicrease in To, (Being Faię dicreased due Fairvalue of cows Ale or Milking cous Ak 4 Value of Milking Cours to growth & Prices ). - 30104119 0 Dicrease in All De Fairvalue of Milking Cows Cows Al 12,000 * 12,000 To (Being dicreased Fair due value to of Milking harvest ) Cous 30/04/194 Profit and loss To Dicrease Al in or Value of milking Cows #2,12,000 & 2,12,000. (Being Profit dicrease and loss in Fairvalue Alc). charged To

B 30/04/19 Milk To Harvested Peofit Al and De loss Alc. ¥ 72,000 72,000 (Being inventory loss All milk f ) harvested recorded Profit charged To as Profit and I c] Bank Ale To sales or sales Alc ¥74,000 # 74,000 (Being of milk recorded ). 30/04/19 ( Sales AK De To, Peofit and Sales Teasferred ). Alc $ 74,000 74.000 (Being loss to Ak profit and loss. 30/04/19 0 Peofit and To, Milk loss All Harvested De Alc ¥72,000 ²72,000 I Being To Inventory Profit and of loss Milk Alo ) Transferred
A) The dicrease in the fair value of Cows due to any reason has to be recorded as a loss in Profit and Loss Account

B) The milk harvested is recorded as Inventory till the time it is sold

C) As the milk is sold , the sales are recorded in Profit and Loss account and the Inventory of such sold milk is charged to Profit and Loss account.