Management Tools for Controlling: Income Statement Assume I.M. Farmer has an accounting period running from January 1 to December 31, 2018. Use the following information obtained for the past calendar year accounting period to complete an income statement for I.M. using the attached form. Then complete the calculations on the last two pages. Inventory Values Crops Livestock January $32,850 $18,600 December 31 $25,440 $31,500 21,200 Revenue and Expenses Depreciation 28,900 Crops Sold (Cash) $189,600 Feed Purchased Insurance premium paid 3,800 Property Taxes 3,400 Interest Paid 33,400 Misc. Expenses 5,800 Market Livestock Purch. 46,500 Market Livestock Sold (Cash) 91,660 Seed Purchased 6,410 Repairs 12,100 Vet. & Health Expense 4,800 Fertilizer Exp. 9,400 Income from Custom Work 4,700 Supplies 4,800 Gain on Sale of Labor Hired 22,600 Breeding Stock 7,600 Fuel Expense 5,800 Gov't payment income 8,890 Gain on mach. sale 11,100 Chemical exp. 9,780 Change in interest payable (2,400) Change in acct. payable +1,400 Average Asset Value Opportunity Cost of Unpaid Labor Opportunity Cost of Operator Management Opportunity Interest Rate Other Information $785,000 Family Living Expenses Income Tax Paid 24,000 Owner's Equity (12/31) Average Equity Value 12,000 9% $ 38,000 10,700 $402,000 $375,675 Income Statement, I.M. Farmer (as of: December 31, 2018) Analysis of Income Statement (show calculations in the last page): Value Totals 1. What was Net Farm Income from Operations? 2. REVENUE: Cash crop sales Cash livestock sales Inventory changes: Crops Market Other product sales Government program payments Gain/loss from sale of culled breeding stock Change in accounts receivable Other farm income Total/Gross revenue What was Net Farm Income? Market livestock 3. Compute Return to Labor & Management: 4. Compute Return to Management: 5. Compute Rate of Retum on Assets: (%) 6. What is Rate of Retum on Equity (in %)? EXPENSES: Purchased feed and grain Purchased market livestock Other cash operating expenses: Fertilizer expense Chemical expense Seed purchased Vet & Health expenses Fuel, oil Labor nepo Repairs, maintenance Property taxes Insurance premium paid Supplies Supplies Misc. expenses Adjustments: Accounts payable Depreciation Total Operating expenses (without interest expense) Cash interest paid Change in interest payable Total interest expense Total Operating expenses (including interest expense) 7. What is the Operating Profit Margin Ratio? 8. How much is I. M. Farmer's Retained Farm Earnings during the past year? 9. What was I. M.'s equity on January 1, 2019? 10. If the owner's average equity value could have been invested in bonds with a 9% return, was farming a good choice? Why or why not? Net farm income from operations Gain/loss on sale of capital assets Machinery Land Total gain/loss on sale of capital assets Net farm income
