Leadfoot Al decided to retire from a successful career in stock car racing and invest all his winnings in a fish farm. He had majored in genetics in college, and he experimented with many different species of fish before coming up with a catfish that had the texture and taste of ocean trout. After incorporating Al's Gourmet Fish Company and operating for two years, he decided to explore expansion possibilities. He talked with his banker about getting a loan and presented a statement of earnings for the current year, based strictly on cash flows, as follows:

From discussions with Al, the banker learned the following:
1. Of the cash collected in the current period from sales of fish, $120,000 was for shipments delivered to customers last year. All the sales made this year were collected before the end of the year.
2. The fish feed can be stored indefinitely, and about 40% of this year's purchases were still on hand at year end.
3. Two fish tanks were purchased last year at a total cost of $80,000. These tanks, along with the one purchased at the beginning of this year, were used all year. Each tank is expected to last five years.
4. The amount for wages includes $60,000 paid to Al, as compensation for his time devoted to the business.
5. There was a total of $1,000 in bills for other operating expenses for the current year that had not been recorded or paid by year end.
6. The land that was sold for $130,000 had been purchased two years ago for $90,000.
Required
Provide Al and his banker with answers to the following questions:
a. What amount of revenue from the sale of merchandise should be reported in this period?
b. What amount of expense for fish food should be reported in this period? How should the remainder of the food be reported?
c. Should some amount for the fish tanks be included in calculating the earnings for the current period? If so, how much?
d. Is it alright for Al's company to pay him wages?
e. What amount for "other operating expenses" should be included in calculating the earnings for the current period?
f. The land was sold for more than its original purchase price. The difference between the selling price and the purchase price of a capital asset is called a gain, and is included on the statement of earnings in the period of the sale. What amount should be included in the company's earnings as the gain on the sale of the land?
g. How much did Al earn from his business this year?
h. Comment on whether you think Al should stay in the fish business or go back to auto racing. In addition to financial factors, briefly describe several non-financial considerations that would be relevant to this decision.

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Cash collected from sale of fish Less: Feed purchases $520,000 Purchase of new fish tank Wages paid Other operating expenses paid $460,000 40,000 80,000 20,000 600,000 (80,000) 130,000 S 50,000 Operating loss Plus: Proceeds from sale of land Net earnings