8/13/2019 64004571 Grennell Farm

1/11

Beginning inventory 0 bushels Wheat production 210,000 bushelsShipped to grain elevators 180,000 bushels

Grain stored at farm at end of 2005 0,000 bushels

8/13/2019 64004571 Grennell Farm

2/11

Production costs per bushelSeed !0"05#ertili$ers and chemicals !0"2%5&achinery costs, fuel, and repairs !0"10'(art)time labor and other costs !0"058*otal production cost per bushel $0.513

Annual costs not related to the volume of productionSalaries and +ages !'2,500

nsurance !-,500*a.es ! 2,500/epreciation !28,500

ther e.penses !-5,000*otal costs not related to production volume $183,000

8/13/2019 64004571 Grennell Farm

3/11

GR !! "" #AR%ncome &tatements

Recognition Methods Sales Collection Production

Sales !522,000 !- 2,-00 ! 1-,100ost of goods sold

Beginning inventory 0 0 0(roduction 10',' 0 10',' 0 10',' 03ess4 nding inventory 15, %0 25, 50 0

ost of goods sold %2, -0 82,080 10',' 0Gross margin 6Sales ) cost of goods sold -2%, 0 80, 20 50 , '0

ther e.penses 18 ,000 18 ,000 18 ,0007et ncome !2- , 0 !1%', 20 ! 2 , '0!- 2-00 96180000 bushels : !2"%0; ) 620,000 bushels : !2"%8;< 1 0000 bushels : !2"8%

! 1-100 0,000 bushels : ! "0' = 180000 bushels : !2"%0! 1-100 6210000 bushels :2"80;=6180000 bushels : 0"10;=6 0,000 bushels : !0"2';!10'' 0 210,000 bushels : !5"1!25 50 0,000 bushels physically in inventory = 20,000 bushels at elevators> end

GR !! "" #AR'alance &heet

Recognition Methods Sales Collection Productionash ! 0,%00 ! 0,%00 ! 0,%00

?ccounts receivable 5%, 00 0 151'00nventory 15, %0 25, 50 0

3and '5,000 '5,000 '5,000Buildings and machinery 6net; 112,500 112,500 112,500(otal assets 5)3,3)0 5**,050 + 0,100

3iabilities 6current; ,000 ,000 ,000+ners@ eAuity

ommon stoc and ?( -5',500 -5',500 -5',500Cetained earnings !2- , 0 !10',' 0 !10',' 0

*otal o+ners@ eAuity '0-,1 0 5 5,2 0 5 5,2 0(otal liabilities and o-ners e/uit $ 3 ,1+0 $5)8, 30 $5)8, 30/etails of /ra+ingsBeginning retained earnings !0 !0 !0 ?dd4 7et income !2- , 0 !1%', 20 ! 2 , '0

0 although there are 0,000 bushels pyhsically in inventory, all +heat is counted as sold,hence no inventory in accounting sense

8/13/2019 64004571 Grennell Farm

4/11

3ess4 nding retained earnings !2- , 0 !10',' 0 !10',' 0/ra+ings !0 !8%,5%0 !215, -00 7o ?DC since sales revenues are not recogni$ed until the collection is made

5% 00 20000E2"%8

151'00 real receivable = reocrded as revenue on 0,000 bushels produced and not sold !5% 00 = !%2100 0000E "0' 20000E2"%8

8/13/2019 64004571 Grennell Farm

5/11

210,000 bushels : !0"51

151'00

8/13/2019 64004571 Grennell Farm

6/11

8/13/2019 64004571 Grennell Farm

7/11

Services Advertising (Media/production) commisionsInsurance agnecy commissionsInstallation fees

Financial service commissionsOthers

Interest

RoyaltiesDividends

8/13/2019 64004571 Grennell Farm

8/11

Revenue RecognitionRecognition

Completion of serviceOn effective commencement of renewal dates of t e related policies! en e"uipment is installed and accepted #y t e customers

Accrual #asis$ in accordance wit terms of agreement! en owner%s rig t to receive payment is esta#lis ed

Driven #y&&$(a) 'ature of service(#) Incidence of costs related to service

! en t e payment of t e service will #e received

ime proportion #asis$ ta*ing into account&&$(a) Amount outstanding(#) Rate applica#le

8/13/2019 64004571 Grennell Farm

9/11

8/13/2019 64004571 Grennell Farm

10/11

8/13/2019 64004571 Grennell Farm

11/11

Prices ?verage price per bushel agreed to be paid by elevator operator !2"%0(rice per bushel at the time of +heat harvest !2"80

losing price per bushel /ec 1, 2005 ! "0' Accounts receivable*o be received4 proceeds for 20,000 bushels frome elevators ?verage sales price of receivable bushels !2"%87o uncollected proceeds on /ec 1, 200-2ash

hec ing account balance !','00

&oney mar et account balance !2 ,200! 0,%00

"andriginal cost of land ! '5,000ost appraised for estate ta. purposes !1,050

'uildin and machiner riginal cost of building and machinery -12,500

?ccumulated depreciation ! 00,000Aipment appariased at net boo value

2urrent "iabilities

7otes payable = ?ccounts payable ! ,0004-ner s e/uit ommon stoc >s par value !',500

?dditional paid)in capital !-50,0007o record of retained earnings