Generally Accepted Accounting Principles and Balance Sheet

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ACC 509 Case 5-2 Response
Justin Tammany

Grennell Farm
Income Statement (Sales/Delivery Method)
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Year Ending December 31, 2009
Sales Revenue$522,000
Less Expenses
Cost of Sales92,340
Wages72,500
Insurance4,500
Taxes32,500
Depreciation28,500
Other45,000
Total Expenses275,340

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Net Income$246,660

Grennell Farm
Balance Sheet (Sales/Delivery Method)
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Year Ending December 31, 2009
AssetsLiabilities
Current AssetsTotal Liabilities33,000
Cash30,900Paid-In Capital450,000
Inventory92,100Common Stock7,500
A.R.59,600
Long-Term AssetsRetained Earnings179,600
Land375,000
Equipment412,500
Depreciation(300,000)
_______________
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Total Assets670,100Total Liabilities & O.E.670,100

In the sales method, the revenue is recognized when the grain is purchased and received by the grain elevator. Thus, the sales revenue was calculated by multiplying 180,000 bushels by an average price of $2.90/bushel. The cost of sales was calculated by multiplying these 180,000 bushels by a total production cost per bushel of $0.531. In the balance sheet, inventory is made up of 30,000 bushels stored at the farm at a current price of $3.07. The accounts receivable balance includes the 20,000 bushels awaiting collection at a price of $2.90 per bushel. Grennell Farm

Income Statement (Collection Method)
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Year Ending December 31, 2009
Sales Revenue$464,000
Less Expenses
Cost of Sales82,080
Wages72,500
Insurance4,500
Taxes32,500
Depreciation28,500
Other45,000
Total Expenses265,080...
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