Reference no: EM132840604

Farm Fresh Bhd began a business to grow deer at Bukit Tinggi on 1 January 2018. On 1 March 2018, the company purchased 40 deer at cost of RM250 each by cash. The deer aged 3 years old on the day it was purchased. The company plan to sell the deer when they reach 5 years old.

The market prices of the deer from an active market on 31 December 2018 are as follows:

Fair value                RM
3 year old             250
4 year old             350
5 year old            500

The total cost to sell deer is estimated to be RM500 as at 31 December 2018. Other operating cost incurred to manage and feed the deer amounted to RM3,000 during year 2018.

The company apply for a grant from the government to buy a machine to feed the deer. On 1 April 2019, the company successfully received a conditional grant from the Ministry of Agriculture amounting to RM20,000 to buy the machine. The company utilized the grant to buy the said machine on 1 May 2019.

Farm Fresh Bhd accounting year ends every 31 December each year.

REQUIRED:

Problem 1: Prepare the journal entries for the above transactions during year 2018.

Problem 2: Prepare the journal entries to record the government grant.

Problem 3: Discuss TWO (2) advantages and TWO (2) disadvantages of the fair value measurement method as compared to the historical cost method in agriculture industry.