Beginning inventory 0 bushels

Wheat production 210,000 bushels

Shipped to grain elevators 180,000 bushels
Grain stored at farm at end of 2005 30,000 bushels
Production costs per bushel
Seed $0.053
Fertilizers and chemicals $0.295
Machinery costs, fuel, and repairs $0.107
Part-time labor and other costs $0.058
Total production cost per bushel $0.513
Annual costs not related to the volume of production
Salaries and wages $72,500
Insurance $4,500
Taxes $32,500
Depreciation $28,500
Other expenses $45,000
Total costs not related to production volume $183,000
 GRENNELL FARM
Income Statements
Recognition Methods
Sales Collection Production
Sales $522,000 $462,400 $614,100
Cost of goods sold
Beginning inventory 0 0 0
Production 107,730 107,730 107,730
Less: Ending inventory 15,390 25,650 0
Cost of goods sold 92,340 82,080 107,730
Gross margin (Sales - cost of goods sold 429,660 380,320 506,370
Other expenses 183,000 183,000 183,000
Net Income $246,660 $197,320 $323,370
$462400 = [(180000 bushels @ $2.90) - (20,000 bushels @ $2.98)] = 160000 bushels @ $2.89

$614100 = 30,000 bushels @ $3.07 + 180000 bushels @ $2.90

$614100 = (210000 bushels @2.80)+(180000 bushels @ 0.10)+(30,000 bushels @ $0.27)
$107730 = 210,000 bushels @ $5.13
$25650 = 30,000 bushels physically in inventory + 20,000 bushels at elevators' end
0 = although there are 30,000 bushels pyhsically in inventory, all wheat is counted as sold,
hence no inventory in accounting sense

GRENNELL FARM
Balance Sheet
Recognition Methods
Sales Collection Production
Cash $30,900 $30,900 $30,900
Accounts receivable 59,600 0 151700
Inventory 15,390 25,650 0
Land 375,000 375,000 375,000
Buildings and machinery (net) 112,500 112,500 112,500
Total assets 593,390 544,050 670,100

Liabilities (current) 33,000 33,000 33,000

Owners equity
Common stock and APIC 457,500 457,500 457,500
Retained earnings $246,660 $107,730 $107,730
Total owners equity 704,160 565,230 565,230
Total liabilities and owners equity $737,160 $598,230 $598,230
Details of Drawings
Beginning retained earnings $0 $0 $0
Add: Net income $246,660 $197,320 $323,370
Less: Ending retained earnings $246,660 $107,730 $107,730
Drawings $0 $89,590 $215,640
0 = No A/R since sales revenues are not recognized until the collection is made
151700 = real receivable + reocrded as revenue on 30,000 bushels produced and not sold
= $59600 + $92100 = 30000*3.07 20000*2.98

59600 = 20000*2.98
210,000 bushels @ $0.513

151700
 Revenue Recognition

Services
Advertising (Media/production) commisions
Insurance agnecy commissions
Installation fees

Financial service commissions

Others

Interest
Royalties
Dividends
 Revenue Recognition
Recognition

Completion of service
On effective commencement of renewal dates of the related policies
When equipment is installed and accepted by the customers
Driven by..,
(a) Nature of service
(b) Incidence of costs related to service
When the payment of the service will be received

Time proportion basis, taking into account..,

(a) Amount outstanding
(b) Rate applicable
Accrual basis, in accordance with terms of agreement
When owner's right to receive payment is established
 GRENNELL FARM
Income Statements
Recognition Methods
Sales Collection Production
Sales $522,000 $462,400 $614,100
Cost of goods sold
Beginning inventory 0 0 0
Production 107,730 107,730 107,730
Less: Ending inventory 15,390 25,650 0
Cost of goods sold 92,340 82,080 107,730
Gross margin 429,660 380,320 506,370
Other expenses 183,000 183,000 183,000
Net Income $246,660 $197,320 $323,370

GRENNELL FARM
Balance Sheet
Recognition Methods
Sales Collection Production
Cash $30,900 $30,900 $30,900
Accounts receivable 59,600 0 151700
Inventory 15,390 25,650 0
Land 375,000 375,000 375,000
Buildings and machinery (net) 112,500 112,500 112,500
Total assets 593,390 544,050 670,100

Liabilities (current) 33,000 33,000 33,000

Owners equity
Common stock and APIC 457,500 457,500 457,500
Retained earnings $246,660 $197,320 $323,370
Total owners equity 704,160 654,820 780,870
Total liabilities and owners equity $737,160 $687,820 $813,870

$143,770 $143,770 $143,770

Prices
Average price per bushel agreed to be paid by elevator operator $2.90
Price per bushel at the time of wheat harvest $2.80
Closing price per bushel Dec 31, 2005 $3.07
Accounts receivable
To be received: proceeds for 20,000 bushels frome elevators
Average sales price of receivable bushels $2.98
No uncollected proceeds on Dec 31, 2004
Cash
Checking account balance $7,700
Money market account balance $23,200
$30,900
Land
Original cost of land $375,000
Cost appraised for estate tax purposes $1,050
Building and machinery
Original cost of building and machinery 412,500
Accumulated depreciation $300,000
Eqipment appariased at net book value
Current Liabilities
Notes payable + Accounts payable $33,000
Owner's equity
Common stock's par value $7,500
Additional paid-in capital $450,000
No record of retained earnings