In 2010, the Sterling Farm Company produced 100,000 bushels of wheat at a cost of $2.00 per bushel. The company has a contract to deliver 80,000 bushels at $2.15 per bushel in 2011. Delivery costs are estimated to be $0.02 per bushel. For guaranteed price contracts, the company recognizes revenue at the completion of production; otherwise, it recognizes revenue at the time of delivery.
Required:
1. Prepare summary journal entries for 2010 and 2011.
2. At what value is the inventory of the company carried after the delivery of the 80,000 bushels? Why?