The Sarver Farm has completed the fall harvest with 50,000 bushels of premium wheat. The wheat cost $75,000 from planting to harvest and the market price of the wheat on the day it is placed in the silo is $2.50 per bushel. Sarver sells 42,000 bushels in Year 1 and holds the remaining 8,000 until Year 2 when it sells for $3.00 per bushel.
-Using the completed transaction (sales)method,how much net income should Sarver recognize in Year 1?
A)$42,000
B)$50,000
C)$105,000
D)$125,000

Question

Quizplus · Accepted Answer

In Year 1, Sarver sells 42,000 bushels at $2.50 per bushel, generating $105,000 in revenue. The cost of the entire harvest was $75,000, so the cost allocated to the 42,000 bushels sold is (42,000/50,000) * $75,000 = $63,000. Therefore, the net income recognized in Year 1 is $105,000 - $63,000 = $42,000.

The Sarver Farm Has Completed the Fall Harvest with 50,000