Reference no: EM132468078

Point 1: Reed Mangus purchased the Hillside Vineyard at an estate auction in April 2019 for €1,250,000. The purchase was risky because the growing season was coming to an end, the grapes must be harvested in the next several weeks, and Reed has limited experience in carrying off a grape harvest.

Point 2: At the end of the first quarter of operations, Reed is feeling pretty good about his early results. The first harvest was a success; 500 bushels of grapes were harvested with a value of €50,000 (based on current local commodity prices at the time of harvest). And, given the strong yield from area vineyards during this season, the net realizable value of Reed's vineyard has increased by €25,000 at the end of the quarter. After storing the grapes for a short period of time, Reed was able to sell the entire harvest for €60,000.

Question a) Why biological asset is non-current asset, but agricultural produce is current asset?

Question b) Explain whether grade vineyard and grade should be classified under biological asset and agricultural produce respectively?

Question c) Upon recording the harvest of grape, how would this affect the other comprehensive income or net income of the company?

Question d) A clerical staff said that the total effect on net income from harvest of grape and sale of grade is that the net income would be increased by €85,000. Do you agree with him? Why?

• A clerical staff asked you why the agricultural produce is recorded at Net realizable value but not at cost. Please advise him. He also asked you how to calculate net realizable value for the agricultural produce for the case of Reed Mangus. Please advise him also.