Question

A farmer owns a cow herd of three years old in average, at Jan 1st 2019. The number of cows in the herd was 1,000. The fair value of the herd at this date was $1,000,000. On 31st of Dec 2019 the number of cows in the herd was 1,350 with one third of three years old in average and the rest two third of four years old in average. The fair value of the three-year and fouryear old animals at Dec 31st 2019 are $1,250 and $1,350 respectively.

Required: 1. What is the fair value of the herd on 31st Dec 2019?

2. Calculate the total change in fair value of the herd and classify the change into the two components; price change and physical change.

3. Show the effect on the financial statements.