Problem set 5 1. From the balance sheet numbers (assignment 4, use the key that is now posted to the website), calculate the Debt to Asset Ratio based on averages from the Beginning and Ending Balance sheet. Would you consider this number (very strong, strong, weak, or critically weak). Explain. 2. From the assignment 4 balance sheet numbers calculate the Current Ratio based on averages from the Beginning and Ending Balance sheet. Would you consider this number (very strong, strong, weak, or critically weak). Explain. 3. Use the following information (along with the balance sheet information from assignment 4) to fill in the blank OSU income statement excel template (also on the website) and calculate Net Farm Income. Supplementary Information for Income Statement exercise You will need the beginning and ending balance sheet from Homework 4 (or the "change" column). Cash crop sales for year $368,265.00, Cash livestock sales for year (all purchased, none raised) $463,250.00, Ag Program payments for year $19,765.00, Custom Work Income for Year $2,900.00, Expenses, livestock Purchases for year $445,200.00, Feed Purchases for year $17,400.00_Labor $13,250.00, Repairs $17,250.00, seed $28,765.00, Fertilizer $51,223.00, Machine Hire $28,375.00, Vet $3,475.00, Marketing $5,875.00, Fuel $26,200.00, Utilities $5,750.00, Property Tax (Ad Valorem) 3,325.00, Insurance $6,345.00, Cash Rent $24,350.00, Herbicide and Insecticide $27,650.00, Miscellaneous $9,825.00 Be sure to account for the following accrual adjustments: Change in Market livestock inventory (and be able to explain why the sign on this entry is what it is) Change in stored crops inventory (and be able to explain why the sign on this entry is what it is) Change in accounts receivable and be able to explain why the sign on this entry is what it is) Change in investment in growing crops (and be able to explain why the sign on this entry is what it is) Change in supplies (and be able to explain why the sign on this entry is what it is) Change in accounts payable and be able to explain why the sign on this entry is what it is) Change in accrued interest (and be able to explain why the sign on this entry is what it it) Management Depreciation for the accounting period is $66,350.00 The farm paid $64,178.00 in farm interest during the year. The farm sold a tractor and some equipment for $8,250.00 more than the management book value at the time of sale. Ignore the "non-farm" section of the income statement Fill in the Blank Example Income Statement and calculate net farm income Assume the farm needs to draw $25,000 from this farm in unpaid family labor. Calculate Return on Assets (based on average assets for the year) for this farm using the FFSG guidelines. Would you consider your calculated measure satisfactory? Ending Balance Net Change Beginning Balance 108,250 12,750 128,250 9,000 20,000 -3,750 0 20,000 120,000 140,000 528,750 77,860 562,500 133,000 Current Assets 1) Cash & Checking 2) Accounts Receivable 3) Prepaid Expenses 4) Cash Investment Growing Crops Inventories 5) Marketable Livestock 6) Stored Crops and Feed 7) Purchased Feed 8) Supplies 9) Other Current Assets 10) TOTAL CURRENT FARM ASSETS Non-Farm Assets 11) Savings 12) Marketable Securities 13) Other Non-Farm Assets 33,750 55,140 0 600 0 125,740 2,000 2,600 849,610 975,350 0 14) Total Current Assets 849,610 975,350 125,740 Dll 647,375 589,375 0 -58,000 0 Non-Current Assets 15) Breeding Livestock 16) Vehicles 17) Machinery, Equipment 18) Investment in Capital Leases 19) Contracts & Notes Receivable 20) Investment in Cooperatives 21) Real Estate, Land 22) Buildings & Improvements 23) Other Non-Current Assets 24) TOTAL NON-CURRENT FARM ASSETS OOOOOO 1,200,000 128,000 1,200,000 128,000 1,975,375 0 -58,000 1,917,375 0 Non-Farm Assets 25) Cash Value, Life Insurance 26) Investment in Other Entitites 27) Other Non-Farm Assets 28) TOTAL NON-CURRENT ASSETS 0 0 -58,000 1,975,375 1,917,375 29) TOTAL ASSETS 2,824,985 2,892,725 67,740 D E F 6,575 573,200 73,320 20,000 12,500 633,000 72,551 19,500 5,925 59,800 -769 -500 0 0 Current Liabilities 30) Accounts Payable 31) Line of Credit and Operating Notes 32) Current Portion of Term Debt 33) Accrued interest Taxes Payable 34) Ad Valorem 35) Employee Payroll Withholding 36) Income Taxes 37) Deferred Taxes 38) Other Accrued Expenses 39) Other Current Liabilities 40) TOTAL CURRENT FARM LIABILITIES Non-farm Liabilities 41) Non-Farm Notes & Interest 42) Other Non-Farm Liabilities 43) TOTAL CURRENT LIABILITIES 0 olololololol 0 64,456 673,095 737,551 0 0 64,456 673,095 737,551 280,621 280,125 215,820 272,375 Non-Current Liabilities 44) Notes Payable, non-Real Estate 45) Notes Payable Real Estate 46) Deferred Taxes 47) Other Non-Current Liabilities 48) TOTAL NON-CURRENT FARM LIABILITIES Non-Farm Liabilities 49) Non-Farm Notes 50) Other Non-Farm Liabilities 51) TOTAL NON-CURRENT LIABILITIES -64,801 -7,750 0 0 -72,551 560,746 488,195 0 0 -72,551 560,746 488,195 52) Total Liabilities 1,233,841 1,225,746 -8,095 Owner Equity 53) Contributed Capital 54) Retained Earnings 55) Total Valuation Equity 0 0 56) TOTAL EQUITY 1,591,144 1,666,979 75,835 57) TOTAL LIABILITIES & EQUITY 2,824,985 2,892,725 67,740 Problem set 5 1. From the balance sheet numbers (assignment 4, use the key that is now posted to the website), calculate the Debt to Asset Ratio based on averages from the Beginning and Ending Balance sheet. Would you consider this number (very strong, strong, weak, or critically weak). Explain. 2. From the assignment 4 balance sheet numbers calculate the Current Ratio based on averages from the Beginning and Ending Balance sheet. Would you consider this number (very strong, strong, weak, or critically weak). Explain. 3. Use the following information (along with the balance sheet information from assignment 4) to fill in the blank OSU income statement excel template (also on the website) and calculate Net Farm Income. Supplementary Information for Income Statement exercise You will need the beginning and ending balance sheet from Homework 4 (or the "change" column). Cash crop sales for year $368,265.00, Cash livestock sales for year (all purchased, none raised) $463,250.00, Ag Program payments for year $19,765.00, Custom Work Income for Year $2,900.00, Expenses, livestock Purchases for year $445,200.00, Feed Purchases for year $17,400.00_Labor $13,250.00, Repairs $17,250.00, seed $28,765.00, Fertilizer $51,223.00, Machine Hire $28,375.00, Vet $3,475.00, Marketing $5,875.00, Fuel $26,200.00, Utilities $5,750.00, Property Tax (Ad Valorem) 3,325.00, Insurance $6,345.00, Cash Rent $24,350.00, Herbicide and Insecticide $27,650.00, Miscellaneous $9,825.00 Be sure to account for the following accrual adjustments: Change in Market livestock inventory (and be able to explain why the sign on this entry is what it is) Change in stored crops inventory (and be able to explain why the sign on this entry is what it is) Change in accounts receivable and be able to explain why the sign on this entry is what it is) Change in investment in growing crops (and be able to explain why the sign on this entry is what it is) Change in supplies (and be able to explain why the sign on this entry is what it is) Change in accounts payable and be able to explain why the sign on this entry is what it is) Change in accrued interest (and be able to explain why the sign on this entry is what it it) Management Depreciation for the accounting period is $66,350.00 The farm paid $64,178.00 in farm interest during the year. The farm sold a tractor and some equipment for $8,250.00 more than the management book value at the time of sale. Ignore the "non-farm" section of the income statement Fill in the Blank Example Income Statement and calculate net farm income Assume the farm needs to draw $25,000 from this farm in unpaid family labor. Calculate Return on Assets (based on average assets for the year) for this farm using the FFSG guidelines. Would you consider your calculated measure satisfactory? Ending Balance Net Change Beginning Balance 108,250 12,750 128,250 9,000 20,000 -3,750 0 20,000 120,000 140,000 528,750 77,860 562,500 133,000 Current Assets 1) Cash & Checking 2) Accounts Receivable 3) Prepaid Expenses 4) Cash Investment Growing Crops Inventories 5) Marketable Livestock 6) Stored Crops and Feed 7) Purchased Feed 8) Supplies 9) Other Current Assets 10) TOTAL CURRENT FARM ASSETS Non-Farm Assets 11) Savings 12) Marketable Securities 13) Other Non-Farm Assets 33,750 55,140 0 600 0 125,740 2,000 2,600 849,610 975,350 0 14) Total Current Assets 849,610 975,350 125,740 Dll 647,375 589,375 0 -58,000 0 Non-Current Assets 15) Breeding Livestock 16) Vehicles 17) Machinery, Equipment 18) Investment in Capital Leases 19) Contracts & Notes Receivable 20) Investment in Cooperatives 21) Real Estate, Land 22) Buildings & Improvements 23) Other Non-Current Assets 24) TOTAL NON-CURRENT FARM ASSETS OOOOOO 1,200,000 128,000 1,200,000 128,000 1,975,375 0 -58,000 1,917,375 0 Non-Farm Assets 25) Cash Value, Life Insurance 26) Investment in Other Entitites 27) Other Non-Farm Assets 28) TOTAL NON-CURRENT ASSETS 0 0 -58,000 1,975,375 1,917,375 29) TOTAL ASSETS 2,824,985 2,892,725 67,740 D E F 6,575 573,200 73,320 20,000 12,500 633,000 72,551 19,500 5,925 59,800 -769 -500 0 0 Current Liabilities 30) Accounts Payable 31) Line of Credit and Operating Notes 32) Current Portion of Term Debt 33) Accrued interest Taxes Payable 34) Ad Valorem 35) Employee Payroll Withholding 36) Income Taxes 37) Deferred Taxes 38) Other Accrued Expenses 39) Other Current Liabilities 40) TOTAL CURRENT FARM LIABILITIES Non-farm Liabilities 41) Non-Farm Notes & Interest 42) Other Non-Farm Liabilities 43) TOTAL CURRENT LIABILITIES 0 olololololol 0 64,456 673,095 737,551 0 0 64,456 673,095 737,551 280,621 280,125 215,820 272,375 Non-Current Liabilities 44) Notes Payable, non-Real Estate 45) Notes Payable Real Estate 46) Deferred Taxes 47) Other Non-Current Liabilities 48) TOTAL NON-CURRENT FARM LIABILITIES Non-Farm Liabilities 49) Non-Farm Notes 50) Other Non-Farm Liabilities 51) TOTAL NON-CURRENT LIABILITIES -64,801 -7,750 0 0 -72,551 560,746 488,195 0 0 -72,551 560,746 488,195 52) Total Liabilities 1,233,841 1,225,746 -8,095 Owner Equity 53) Contributed Capital 54) Retained Earnings 55) Total Valuation Equity 0 0 56) TOTAL EQUITY 1,591,144 1,666,979 75,835 57) TOTAL LIABILITIES & EQUITY 2,824,985 2,892,725 67,740