Reference no: EM132633288

Question - In 2014, A farmer purchased a vineyard at P200,000, which approximates its fair value less costs to sell at that time. At December 31, 2014, the vineyard is valued at P365,000 (fair value less costs to sell). At December 31, 2015, the value of the vines has not improved, but the vines has grapes on it worth P85,000. On June 30, 2016, the farmer harvests, at a cost of P3,000, the grapes, at which stage the grapes are valued at P115,000 (fair value less costs to sell). The farmer incurred costs of growing and cultivating the vineyard (e.g., fertilizer, water, etc.) amounting to P15,000, P10,000 and P5,000 in the years 2014, 2015, and 2016, respectively.

On December 31, 2016, the farmer also incurs P40,000 direct costs in processing the grapes into barrels of wine to be ready for sale to its customers.

1. The net amount to be recognized in 2016 profit or loss is

a. P107,000 c. P22,000

b. P 67,000 d. (P18,000)

2. The carrying amount of inventories of wine as of December 31, 2016 is

a. P155,000 c. P85,000

b. P125,000 d. P70,000