Farming query please re. the (notional) cost of stock bred on farm.
According to farm stock valuation guidelines which I read in an accounts / taxation section in a farming handbook a farmer must value his/ her farming stock, for tax purposes, at the lower of cost and market value (net realisable value).
I understand that Revenue accept the following percentages as approximating cost in the case of immature stock:
(a) Cattle: 60% of open market value.
(b) Sheep, pigs, harvested crops: 75% of open market value.
I understand that this means that if, lets say, a farmer has 10 cows, which cows have 10 calves in 2010, none of which are sold in 2010, those calves are valued at 60% of their market value at 31/12/10 (assuming that 31/12/10 is year end). Lets further assume that the market value of the cows is €1000 per head and the market value of the calves is €500 per head at 31/12/10. The Sales / Cost of sales calculation should read as follows?
Cattle Sales 0
Opening Stock (10 cows @ €1000 X 60%) = €6000
Purchases / Births (10 calves, valued at €500 x 60%) = 3000
Closing Stock = €9000
Cost of sales = 0
My question (apologies for the delay in getting there), how would the Cost of sales be calculated if all of the calves were sold in 2010? Assume the 10 calves were sold in November 2010 at €500 per head:
Cattle (Calf Sales) €5,000
Opening Stock (10 cows @ €1000 X 60%) = €6000
Purchases / Births (10 calves valued at 500 x 60%) = 3000
Closing Stock = €6000 (i.e. the 10 cows)
Cost of sales = 3000?
Is this correct - can a farmer apportion a cost, (60% of market value?) based on the above, to farm bred calves? Obviously there is a real cost in rearing the calves - feed, vetinary etc, but those real costs will be accounted for in the expenses / overheads part of the accounts.
I hope that my query is clear
Any advise would be greatly appreciated
According to farm stock valuation guidelines which I read in an accounts / taxation section in a farming handbook a farmer must value his/ her farming stock, for tax purposes, at the lower of cost and market value (net realisable value).
I understand that Revenue accept the following percentages as approximating cost in the case of immature stock:
(a) Cattle: 60% of open market value.
(b) Sheep, pigs, harvested crops: 75% of open market value.
I understand that this means that if, lets say, a farmer has 10 cows, which cows have 10 calves in 2010, none of which are sold in 2010, those calves are valued at 60% of their market value at 31/12/10 (assuming that 31/12/10 is year end). Lets further assume that the market value of the cows is €1000 per head and the market value of the calves is €500 per head at 31/12/10. The Sales / Cost of sales calculation should read as follows?
Cattle Sales 0
Opening Stock (10 cows @ €1000 X 60%) = €6000
Purchases / Births (10 calves, valued at €500 x 60%) = 3000
Closing Stock = €9000
Cost of sales = 0
My question (apologies for the delay in getting there), how would the Cost of sales be calculated if all of the calves were sold in 2010? Assume the 10 calves were sold in November 2010 at €500 per head:
Cattle (Calf Sales) €5,000
Opening Stock (10 cows @ €1000 X 60%) = €6000
Purchases / Births (10 calves valued at 500 x 60%) = 3000
Closing Stock = €6000 (i.e. the 10 cows)
Cost of sales = 3000?
Is this correct - can a farmer apportion a cost, (60% of market value?) based on the above, to farm bred calves? Obviously there is a real cost in rearing the calves - feed, vetinary etc, but those real costs will be accounted for in the expenses / overheads part of the accounts.
I hope that my query is clear
Any advise would be greatly appreciated