Using the market price (production) method,how much net income should Sarver recognize in Year 1?

A) $42,000
B) $50,000
C) $105,000
D) $125,000

In Year 1, Sarver sells 42,000 bushels at $2.50 per bushel, totaling $105,000. The cost of producing 50,000 bushels is $75,000, so the cost per bushel is $1.50 ($75,000 / 50,000 bushels). The cost of goods sold for the 42,000 bushels is $63,000 (42,000 bushels * $1.50 per bushel). The net income for Year 1 is the sales revenue minus the cost of goods sold, which is $105,000 - $63,000 = $42,000.