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1. Fill in lines A, B, C, D, F, H, and J (the lines are highlighted) on the Income Statement on the next page of this document.

2. Use the information you just calculated and the Balance Sheet for I.M. Farmer and the Statement of Owners Equity (these are both in PowerPoint 2) to calculate the following. I know these numbers seem as though they dont fit, but go through the process and show me your work. The opportunity cost of (unpaid) management =$30,000 and the opportunity cost for (unpaid) labor = $42,000.

1. 1. Rate of Return on Assets Assume the Beginning Year Total Asset Value = $690,000 (Use the Market Values)
2. 2. Rate of Return on Equity
3. 3. Operating profit margin ratio
4. 4. Opportunity Cost of all Capital given a 5% interest rate.

REVENUE		Total
Crops and Feed Sales	$ 100,000
Livestock Sales	$ 180,000
Inventory changes: Crops	$ 4,000
Inventory changes: Livestock	$ (1,500)
Accrual adjustments: accounts receivable	$ 2,000
Government Payment	$ 3,400
Other Income	$ 2,800
A. TOTAL REVENUE
EXPENSES
Feed Purchased	$ 9,000
Market Livestock Purchased	$ 110,000
Hired Labor	$ 21,000
Livestock Expense	$ 4,700
Crop Expense	$ 66,000
Fuel, Oil	$ 7,200
Repairs and Maintenance	$ 5,800
Machine Hire	$ 1,500
Taxes	$ 6,500
Insurance	$ 3,000
Other Cash Expenses	$ 2,300
B. TOTAL CASH EXPENSES
C. NET CASH INCOME (A - B)
Depreciation: Machinery and Equipment	$ 4,700
Depreciation: Building & Improvements	$ 6,300
D. TOTAL DEPRECIATION
E. INTEREST PAID ON DEBT		$ 21,000
Accrual Adjustments (Expense items):
Expense items accrued but not paid	$ 9,500
Expense items paid but not accrued	$ (32,000)
F. ACCRUAL ADJUSTMENTS
G. VALUE OF HOME CONSUMPTION	$ 500
H. NET INCOME FROM OPERATIONS (C-D-E-F+G)
I. Gain/Loss on sale of capital assets:	$ 680
J. NET FARM INCOME (H+I)

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