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Chapter 9: Q9IFRS (page 500)

Question:Refer to the data in IFRS9-8 for Keyser鈥檚 Fleece Inc. Prepare the journal entries for (a) the wool harvested in the first six months of 2017, and (b) the wool harvested that is sold for $10,500 in July 2017.

Short Answer

Expert verified

(a) Wool inventory will be debited, and Unrealized Holding Gain or Loss鈥擨ncome will be credited by $9,000, respectively.

(b) Cash account is debited by $10,500, cost of goods sold is debited by $9,000, wool inventory is credited by $9,000 and sales revenue is credited by $10,500.

Step by step solution

01

Agricultural produce accounting

In the case of agricultural produce, it is valued at fair value less the cost incurred for selling, which is known as net realizable value. It is treated like its cost and is accounted like other inventories.

02

Journal entry for wool harvested

(a) Journal entries are as follows:

Date

Description

Debit

Credit

Wool Inventory

$9,000

Unrealized Holding Gain or Loss鈥擨ncome

$9,000

(To record wool inventory)

03

Journal entry for wool harvested sold

(2) Journal entries are as follows:

Date

Description

Debit

Credit

Cash

$10,500

Cost of Goods Sold

9,000

Wool Inventory

$9,000

Sales Revenue

10,500

(To record sales revenue)

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