Beginning inventory Wheat production Shipped to grain elevators Grain stored at farm at end of 2005

0 bushels 210,000 bushels 180,000 bushels 30,000 bushels

Production costs per bushel Seed Fertilizers and chemicals Machinery costs, fuel, and repairs Part-time labor and other costs Total production cost per bushel Annual costs not related to the volume of production Salaries and wages Insurance Taxes Depreciation Other expenses Total costs not related to production volume

$0.053 $0.295 $0.107 $0.058 $0.513 $72,500 $4,500 $32,500 $28,500 $45,000 $183,000

Sales Cost of goods sold Beginning inventory Production Less: Ending inventory Cost of goods sold Gross margin (Sales - cost of goods sold Other expenses Net Income

GRENNELL FARM Income Statements Recognition Methods Sales Collection Production $522,000 $462,400 $614,100 0 107,730 15,390 92,340 429,660 183,000 $246,660 0 107,730 25,650 82,080 380,320 183,000 $197,320 0 107,730 0 107,730 506,370 183,000 $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

Cash Accounts receivable Inventory Land Buildings and machinery (net) Total assets

GRENNELL FARM Balance Sheet Recognition Methods Sales Collection Production $30,900 $30,900 $30,900 59,600 0 151700 15,390 25,650 0 375,000 375,000 375,000 112,500 112,500 112,500 593,390 544,050 670,100 33,000 457,500 $246,660 704,160 $737,160 $0 $246,660 $246,660 33,000 457,500 $107,730 565,230 $598,230 $0 $197,320 $107,730 33,000 457,500 $107,730 565,230 $598,230 $0 $323,370 $107,730

Liabilities (current) Owners equity Common stock and APIC Retained earnings Total owners equity Total liabilities and owners equity Details of Drawings Beginning retained earnings Add: Net income Less: Ending retained earnings

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

Sales Cost of goods sold Beginning inventory Production Less: Ending inventory Cost of goods sold Gross margin Other expenses Net Income

GRENNELL FARM Income Statements Recognition Methods Sales Collection Production $522,000 $462,400 $614,100 0 107,730 15,390 92,340 429,660 183,000 $246,660 0 107,730 25,650 82,080 380,320 183,000 $197,320 0 107,730 0 107,730 506,370 183,000 $323,370

Cash Accounts receivable Inventory Land Buildings and machinery (net) Total assets

GRENNELL FARM Balance Sheet Recognition Methods Sales Collection Production $30,900 $30,900 $30,900 59,600 0 151700 15,390 25,650 0 375,000 375,000 375,000 112,500 112,500 112,500 593,390 544,050 670,100 33,000 457,500 $246,660 704,160 $737,160 33,000 457,500 $197,320 654,820 $687,820 33,000 457,500 $323,370 780,870 $813,870

Liabilities (current) Owners equity Common stock and APIC Retained earnings Total owners equity Total liabilities and owners equity

$143,770

$143,770

$143,770

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

$2.90 $2.80 $3.07 $2.98 $7,700 $23,200 $30,900 $375,000 $1,050 412,500 $300,000 $33,000 $7,500 $450,000