1. The Maambo family own a farm at Kabwe in the Central Province. The farm is 800 ha. The farm is valued at K 9,000,000

The assets for the farm at the start of the year include depreciable assets of K 1,440,000 and cash of K 1,000,000.

Their liabilities are a bank loan of K 2,500,000. During the year they make a loan repayment from the bank loan of K 250,000.

Interest paid on the bank loan is K 325,000.

Interest on an overdraft was K 12,000

a. Construct a Balance Sheet for the Maambo family at the start of the year.

The farm is involved in cropping. They grow a rotation of Soybeans, Maize, Sunflower, another crop of Maize finishing the rotation with a crop of Cassava.

Details for the cropping system:

b. Calculate total income and total variable costs for each of the above crops.

The deduction from gross income and total variable costs to arrive at Operating Profit, Net Profit then Growth in Equity over a production period of one year for the Maambos farm business are displayed in the following figure.

c. Calculate Operating Profit, Net Profit and Growth in Equity over one year for the Maambo Familys Farm business.

Note that apart from income on crops, the Maambo family also earned interest of K 204,480 on their bank balance at the beginning of the year.

d. Calculate Annual Net Cash Flow and amount of Cash for the Balance Sheet at the end of the year.

Crop Soybeans Maize Sunflower Cassava Hectare 160 320 160 160 Yield/ha Tonnes 3.0 4.5 2.5 10.5 Price/tonne K 4,000 2,000 4,500 1,200 Variable costs/ha K 5,980 4,250 4,280 5,260 Total Income Variable Costs Total Gross Margin Fixed Cost Interest Taxation Operating Profit Net Profit Growth in Equity 204,480 X Calculation of Net Profit and Increase in Equity Annual Income Income from Soybeans Income from Maize Income from Sunflower Income from Cassava Interest eamed Total Income (Revenue) Annual Expenses Variable costs Soy beans Maize Sunflower Cassava Total variable costs X Fixed costs Owner-operators allowance 1,750,000 Administration expenses 1,000,000 Depreciation 10% of depreciable assets Total Fixed costs X Total Expenses Operating Profit Less interest paid on loan 13% of loan in Balance sheet 325,000 Less interest paid on overdraft 12,000 Total interest Net Profit Less Tax paid 30% of Net Profit Increase in Equity X X 337,000 X x