A farm family grows crops in the Kabwe district of Zambia for the rotation shown in the following table:

CROP SOYBEANS MAIZE SUFLOWER CASSAVA

HECTARES 160 320 160 160

YIELD/HA TONNES 3.0 4.5 2.5 1.5

PRICE/TONNE K 4,000 2,500 4,500 1,200

VARRIABLE COSTS K 5,980 4,250 4,280 5,260

Calculate the total income per hectare for the various crops.

Calculate the total variable costs for the various crops.

The amount of interest received was estimated to be K 200,000

Overhead or fixed cost were estimate as follows:

Owner operators labour and management K 1,750,000

Administrative costs K 1,000,000

Depreciation of assets K 150,000

Interest on loans was estimated at K 337,000

The amount of tax was estimated at 30% of the estimated Net Profit.

Calculate the estimated operating profit, net profit and increase in owners equity for the farm business over the year.

You need to check that the increase in equity calculated above is the same as that which is calculated from balance sheets for the farm business.

Assets at the beginning of the year include value of the land being K 9,500,000, depreciable assets of K 1,500,00 and cash of K 175,000.

Liabilities at the start of the year are a bank loan of K 2,250,000.

Prepare a balance sheet at the start of the year.

Calculate equity as a percentage of total assets at the beginning of the year.

Depreciation is at the rate of 10% of the value of assets at the beginning of the year.

Repayment of loan is at 10% of the value of the loan at the beginning of the year.

Calculate estimated net cash flow during the year.

Calculate cash on hand at the end of the year.

Prepare a balance sheet for the farm at the end of the year.

Calculate estimated increase in equity over the year. (Should be the same as that calculated previously).

At the end of the year, calculate the value of equity as a percentage of total assets.

Calculate the percentage efficiency of the farm over the year.

Calculate the gearing ratio of the farm at the end of the year.

Comment on the expected health of the farm business for the year.