BALANCE SHEET Rhonda Rancher has applied for a loan. Her banker, Larry Loanmaker, says the old balance sheet on file must be brought up to date before a loan will be considered. Rhonda spends the rest of the afternoon taking inventory and gathering other information. Complete the balance sheet on the attached pages using the information below compiled by Rhonda on February 15, 2008. Milo on hand Hay on hand -Growing wheat -Farm mortgage (due4/01/08) 4200 cwt. @ $4.40 per cwt. 75 tons @ $50.00 per ton 280 acres @ $22.50 per acre $14,000 principal $20,000 accrued interest balance after 4/01/08 payment $208,000 "Buildings & improvements - Note payable on feeder cattle (all due 11/15/08) $48,000 $34,000 Calves (to be sold in May 2008) -Feeder cattle (to be sold in 60 days) Note payable at bank (all due 3/1/09) -Vehicles -Other machinery & equipment -Loan on beef cows (due 10/01/08) 98 head @ $275 per head 138 head @ $575 per head $52,000 $15,500 $80,500 $9,000 principal. $3,900 accrued interest balance after 10/1/08 payment $38,000 1020 acres @ $560 per acre 106 head @ $650 per head 4 head @ $1,000 each -Land (present market value) -Beef breeding cows - Bulls -Checking account balance -Account payable at Joe's Feed & Seed -Account receivable -Shop Equip. (welder, lathe, drill press, etc.) -Ford Motor Co. stock Other Information 1) $5,400 $4,200 $1,600 $2,000 200 shares @ $65 per share Has paid in advance for $6,000 worth of feed in order to get a good price on it. The feed will be delivered in May 2008. -2) Income and social security taxes on 2007 income is estimated at $7,200. -3) Rhonda contributed $50,000 to get her business started. 4) Retained earnings since the beginning of the business equals $305,000. 1. What is Rhonda's owner's equity as of February 15, 2008? 2. How much working capital does Rhonda have? 3. What is her current ratio? What is her debt/asset ratio? 5. What is her debt/equity ratio? 6. What is her equity/asset ratio? 7. Assume you are a financial consultant hired by Rhonda to analyze her financial condition. Based on this balance sheet, what part of her financial condition is most in need of improvement? WHY? 8. 9. What does this balance sheet tell you about the amount of profit Rhonda made in 2007? Explain your answer. Rhonda wants to borrow $50,000 from the bank to buy additional beef breeding cows. They will cost $50,000. Assume the loan is made, the cows are purchased. a) What will Rhonda's owner's equity be immediately after the transactions are completed if there are no other changes on her balance sheet? b) What will her debt/asset ratio be? c) What will be her debt/equity ratio be? 10. If you were Larry Loanmaker, would you loan Rhonda the money? Why? LIABILITIES AND NET WORTH: Market Market Notes 16) Accounts Payable/Accrued Expenses 17) Notes payable within one year 18) Current Portion of term debt 19) Accrued Interest 20) Fed. income & self-employ. taxes payable 21) State and local income taxes payable 22) Other accrued expenses 23) Current portion-deferred taxes "deleted this formula for this example (adds lines 16-23) 24)TOTAL CURRENT LIABILITIES 25) Notes payable Machinery Breeding livestock 26) Real Estate Debt 27) Noncurrent Portion: deferred taxes 28) TOTAL NONCURRENT LIABILITIES $0 $0 29) TOTAL FARM LIABILITIES $0 $0 $0 $0 30) Contributed Capital "deleted this formula for this example (adds lines 25-27) (adds lines 24 & 28) **Added at beginning of business life 31) Retained earnings 32) Valuation adjustment $0 $0 33) FARM NET WORTH/Total Owner Equity $0 $0 (subtracts line 29 from 15) 34) TOTAL LIABILITIES AND OWNER EQUITY $0 $0 (adds line 29 & 33)