You have been approached by Mrs. Laney Smith, who would like you to help her organize her financial information into financial statements in preparation for filing income taxes. Mrs. Smith has an Angora goat operation that runs approximately 350 does who have kids yearly. She sells the kids to other breeders and the fleece/wool from her goats to an out-of-state fiber mill. She needs to put together Balance Sheets and Income Sheets for the last two yearends - (2017 and 2018).

1. Use the following information to create

1) a Balance Sheet for yearends 2017 and 2018 and

2) an Income Statement for 2018:

Mrs. Smith only recognizes depreciation on her truck and trailer used to haul animals. She purchased the truck new for $50,000 on January 11, 2017 and the trailer was purchased for $10,000 in March of 2017. The estimated salvage value of the truck is $4,500 and a 7 year useful life; and the salvage value of the trailer is $2,000 after 10 years. When she purchased her tractor, she only put $8,000 as a down payment. She financed the remaining portion with equal annual principle payments over 6 years. In addition to his annual principle payments, she makes annual interest payments of 10% of the balance on the loan. She had 305 breeding does valued at $340/head at yearend 2017. She increased her flock size in 2018 to 325 head.

As of December 31, 2017 she had livestock held for sale (lambs and non breeding ewes) valued at $38,000. She also had wool inventories valued at $9,000. As of December 31, 2018 her livestock inventories increased to $43,000, and her wool inventories decreased to $8,500.

Every spring she takes out an annual operating loan to help pay for feed, supplies, and other operating expenses. She pays the entire loan balance off on January 31st of the following year when she sells her wool and some lambs. The interest expense each year is 5% and begins accruing when she draws on the loan March 31st, but she does not make an interest payment until January 31st. She took out a loan in the amount of $26,000 in 2017, and $30,000 in 2018.

Her farm consists of 100 acres, a home, and some barns and outbuildings. This was valued at $450,000 back in 2003. She had an updated appraisal done in 2018 which valued the farm at $560,000.

She took out a mortgage on the farm several years ago. She makes annual principle payments of $12,000 and interest payments of 6% of the balance of the loan. She makes payments on Dec 31st each year. Her balance as of December 31, 2016 was $275,000.

As of December 31, 2017, she had accounts receivable from her primary fleece buyer of $18,000, and from the wool mill of $3,200. She also had an account payable with the local farm supply store with a balance of $5,300, which she charged all her feed and supplies to. As of December 31, 2018, her lamb buyer owed her $24,000 and the wool mill owed $2,500. Her farm store account decreased to $3,200.

She buys her feed only once a year to cut down on costs, so she usually has feed in her barn at the end of year. At yearend 2017 the feed left in her barn was valued at $2,500. She got a good deal on feed in 2018 so she purchased quite a bit and had approximately $4,800 left over at the end of the year.

She keeps supplies on hand such as vet supplies, milk replacer, shearing supplies, etc. At yearend 2017 these were valued at $900. This increased to $850 at yearend 2018.

She uses her checking account at the local bank for all his cash transactions. Her checking account balance as of December 31, 2017 was $9,300, and had decreased by $2,300 the following year.

Note: The balance sheets will be as of December 31st and with the assumption that the December 31st loan payments have been made.

2. Use the information from the Balance Sheets you created to calculate the Working Capital Ratio and Debt to Equity ratio for 2017 and 2018: