PROBLEM 2 Assume U.R. Rancher has an accounting period running from January 1 to December 31. Use the following information obtained for the past calendar year accounting period to complete an income statement for U.R. Then complete the calculations on the last two pages. Inventory Values 01-Jan 31-Dec Grain and Hay Livestock (market) Misc. supplies $14,500 20,000 1,800 $14,300 26,000 2,700 Income & Expenses Bldg Depreciation Feed Purchased Property Taxes Machinery Depreciation Misc. Expenses Market Livestock Sold Repairs Misc. Income Fertilizer & Chemical Expen Labor Hired $2,700 5,800 2,100 4,800 1,400 70,500 2,800 1,500 5,400 12,400 Crops Sold Insurance Interest Paid Feeder Livestock Purchased Seed Purchased Vet. and Health Expense Gain on Sale of Breeding Livestock Gain on Sale of Machinery Income from Custom Work Gas & Oil Expense 56,000 1,300 20,900 22,500 1,900 1,100 1,200 2,600 1,700 2,800 Other Information $520,000 Average Asset Value Assumed Value of Operator Labor Assumed Value of Operator Management Family Living Expenses Income Tax Paid last year Net Worth (12/31) Opportunity cost of Capital $15,000 7,300 350,000 12,000 4,000 10% SHOW WORK WHERE NEEDED 1. What was Net Farm Income from Operations? $ 2. What was Net Farm Income? $ 3. How much did U.R. Rancher's equity increase or decrease during the past year? $ 4. What was U.R.'s equity on January 1? $ 5. What was the average equity in the past year? $ 6. Compute Adjusted Net Farm Income from Operations: $ 7. Compute Return to Labor and Management: $ 8. Compute Return to Labor: $ 9. Compute Return to Management: 10. Compute Percent Return on Assets: % 11. Compute Percent Return on Equity: % 12. Provide your assessment of the profitability of this business