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 2?
A)$4,000
B)$12,000
C)$24,000
D)$8,000

Question

Quizplus · Accepted Answer

The net income recognized in Year 2 is the difference between the sales revenue and the cost of goods sold. The sales revenue is 8,000 bushels * $3.00 per bushel = $24,000. The cost of goods sold is 8,000 bushels * ($75,000 / 50,000 bushels) = $12,000. Therefore, the net income recognized in Year 2 is $24,000 - $12,000 = $12,000.

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