Under Sales Method

Sales 522,000
Less: Cost of goods sold
Beginning Inventory -
Add: Production 107,730
Cost of goods available for sale 107,730
Less: Ending Inventory 15,390 92,340
Gross Sales 429,660
Expenses
Salaries and wages 72,500
Insurance 4,500
Taxes 32,500
Depreciation 28,500
Other expenses 45,000 183,000
Net Income 246,660
Grennel Farm
Income Statement
As at year end December 31, 2009
Assets
Current Assets
Cash 30,900
Accounts Receivable 59,600
Inventory 15,390
Total Current Assets 105,890
Noncurrent Assets
Land 375,000
Machinery 412,500
Less: Accumulated Depreciation 300,000 112,500
Total Noncurrent Assets 487,500
Total Assets 593,390
Liabilities
Notes and Accounts Payable 33,000
Owner's Equity
Common Stock 7,500
Additional Paid-In Capital 450,000
Retained Earnings 102,890
Total Owner's Equity 560,390
Total Liabilities and Owner's Equity 593,390
Sales (2.9*180,000) 522,000
Production (.513*210,000) 107,730
Ending Inventory (.513*30,000) 15,390
Accounts Receivable (2.98*20,000) 59,600
Grennel Farm
Balance Sheet
As at year end December 31, 2009
Under Collection Method
Sales 462,400
Less: Cost of goods sold
Beginning Inventory -
Add: Production 107,730
Cost of goods available for sale 107,730
Less: Ending Inventory 25,650 82,080
Gross Sales 380,320
Expenses
Salaries and wages 72,500
Insurance 4,500
Taxes 32,500
Depreciation 28,500
Other expenses 45,000 183,000
Net Income 197,320
Grennel Farm
Income Statement
As at year end December 31, 2009
Assets
Current Assets
Cash 30,900
Accounts Receivable -
Inventory 25,650
Total Current Assets 56,550
Noncurrent Assets
Land 375,000
Machinery 412,500
Less: Accumulated Depreciation 300,000 112,500
Total Noncurrent Assets 487,500
Total Assets 544,050
Liabilities
Notes and Accounts Payable 33,000
Owner's Equity
Common Stock 7,500
Additional Paid-In Capital 450,000
Retained Earnings 53,550
Total Owner's Equity 511,050
Total Liabilities and Owner's Equity 544,050
Sales (2.9*180,000) - A/R (2.98*20000) 462,400
Production (.513*210,000) 107,730
Ending Inventory (.513*50,000) 25,650
Accounts Receivable -
Grennel Farm
Balance Sheet
As at year end December 31, 2009
Under Production Method
Sales 614,100
Less: Cost of goods sold
Beginning Inventory -
Add: Production 107,730
Cost of goods available for sale 107,730
Less: Ending Inventory - 107,730
Gross Sales 506,370
Expenses
Salaries and wages 72,500
Insurance 4,500
Taxes 32,500
Depreciation 28,500
Other expenses 45,000 183,000
Net Income 323,370
Grennel Farm
Income Statement
As at year end December 31, 2009
Assets
Current Assets
Cash 30,900
Accounts Receivable 151,700
Inventory -
Total Current Assets 182,600
Noncurrent Assets
Land 375,000
Machinery 412,500
Less: Accumulated Depreciation 300,000 112,500
Total Noncurrent Assets 487,500
Total Assets 670,100
Liabilities
Notes and Accounts Payable 33,000
Owner's Equity
Common Stock 7,500
Additional Paid-In Capital 450,000
Retained Earnings 179,600
Total Owner's Equity 637,100
Total Liabilities and Owner's Equity 670,100
Sales (2.9*210000) 614,100
Production (.513*210,000) 107,730
Ending Inventory -
Accounts Receivable (2.98*20,000) + (3.07*30000) 151,700
Grennel Farm
Balance Sheet
As at year end December 31, 2009
>225000 (Offer) + 1050*1900 (Appraised) = 2.22M
Method Net Income Equity Total Investment ROI
Sales 246,660.00 560,390.00 2,405,390 10%
Collection 197,320.00 511,050.00 2,356,050 8%
Production 323,370.00 637,100.00 2,482,100 13%
Land (Current Value-Book Value) 2220000-375000
1845000
2. The land's current value based on appreciation can be shown as $2.22M. It is calculated from
the 225000 for 100 acre offer plus the appraised amount of 1050/acre.
3. Ms. Grey should retain the farm because the land continues to appreciate at a rate of 10%
each year plus the returns on investment are good. (Shown below)