Economics 330
Fall 2001
Exam 2-Key
Name: ____________________
Lecture:
1:00
2:00
Financial Statements and Analysis
A.
Circle the best answer. Put a square around your second choice (half credit). (4 pts each)
1.
Which financial statement covers a single point in time rather than a period of time?
a. net income statement
b. statement of owner equity
c. statement of cash flows
d. net worth statement
2.
Which type of transactions appear in both the Net Income Statement and the Statement of
Cash Flows?
a. assets and liabilities
b. sales and purchases of capital assets
c. cash income and expenses
d. new loans received and principal paid
3.
Enterprise accounting shows the net income earned from:
a. each major asset on the farm
b. each major production or service activity on the farm
c. each employee on the farm
d. each quarter during the year
4.
The degree to which the value of what a farm produced exceeded the cost of producing it
is called:
a. solvency
b. liquidity
c. efficiency
d. profitability
5.
Economic efficiency is measured by which of the following:
a. net farm income
b. gross revenue per year of labor
c. change in net worth
d. net cash flow
6.
A lender would usually prefer to have farm assets valued at their _____ value on a net
worth statement that is part of a loan application.
a. cash
b. accrual
c. cost
d. market
7.
Balance Sheet is a common name used for the:
a. net worth statement
b. net income statement
c. statement of cash flows
d. statement of owner’s equity
B. Answer as indicated.
8. Place each of the following assets or liabilities in its appropriate location in the Net Worth
Statement format below. Use its letter.
(10 pts)
A.
B.
C.
D.
E.
feed bill owed at local elevator
grain bins
20-year loan used to buy farmland
30 bags of seed corn in storage
50 beef cows
Current
Assets
Liabilities
Current
Noncurrent
(intermediate, long term)
Noncurrent
(intermediate, long term)
9. Explain the difference between single-entry and double-entry accounting.
(4 pts)
10. Porcine Farms, Inc. produces feeder pigs. On January 1 they had 3,150 head, and on
December 31 they had 4,000 head. They sold 5,500 pigs during the year, and lost 65 due to
death loss after weaning. If they didn’t buy any pigs from anyone else, how many did they
produce during the year?
(4 pts)
______________ head
11. Indicate which code number from the chart of accounts you would give each of the
following cash transactions (use only one code for each one).
(18 pts)
Charts of Accounts
100 – cash income
600 – cash expense
200 – new loans received
700 – loans repaid
300 – sale of capital assets
800 – purchase of capital assets
400 – nonfarm income
900 – nonfarm expenses
_______ paid contractor for cost of a new dairy barn
_______ paid first half of cash rent on 180 acres to landlord
_______ received soybean deficiency payment check from USDA
paid machinery loan payment:
_______ - interest
_______ - principal
_______ paid LP gas bill for heating the family residence
12. Enterprise Accounting
The following farm has two enterprises, beef cows and hay.
Enter the letter and the $ values for the following income and expense transactions under the
appropriate enterprise below. Include accrual adjustments.
(24 pts)
A.
B.
C.
D.
E.
F.
G.
H.
Sold 100 large round hay bales at auction for $40 each.
Annual depreciation on the hay baler was $3,000.
Paid $500 veterinary bill for treating calves.
Had 60 calves worth $500 each at the beginning of the year, and 65 calves worth $400 each at the
end of the year.
Sold 5 cull cows for $2,500 total.
Fed 100 tons of hay produced on the farm to the beef cow herd. Valued hay at $60 per ton.
Owed the bank $20,000 for cattle operating loan principal, plus $1,500 accrued interest at the
beginning of the year. At the end of the year the loan principal was $17,000 and the accrued
interest was $2,000.
The family butchered one steer for home consumption. They could have sold it for $750.
Beef Cows
Income
Expenses
Hay
13.
Net Worth Statement
Name: Johnson Farms
Assets
Current assets
Intermediate assets
Long-term assets
Total assets
Net Income Statement
Name: Johnson Farms
Date: 12/31/2001
$ 98,950
$152,500
$510,000
$562,500
Liabilities
Current liabilities
Intermediate liabilities
Long-term liabilities
Total liabilities
$ 62,070
$140,000
$
0
$202,070
Net worth
$360,430
Year: 2001
Cash farm income
Accrual adjustments
Gross farm revenue
$193,210
+20,290
$215,110
Cash farm expenses
Accrual adjustments
Depreciation
Gross farm expenses
$160,320
-12,755
15,700
$163,265
Net farm income
$ 51,845
For the farm above, find the following. Show your work.
(12 pts)
a.
Debt-to-asset ratio
______________%
b.
Working capital
$_____________
c.
Net income ratio
______________%
d.
If their beginning net worth (1-1-2001) was $335,000, and they made no adjustments to
capital asset market values, how much did they withdraw for family living expenses?
Show your work below.
$_____________
KEY
Economics 330
Fall 2001
Exam 2
Financial Statements and Analysis
1.
2.
3.
4.
5.
6.
7.
8.
D
C
B
D
B
D
A
Assets
9.
Liabilities
Current
D
Current
A
Noncurrent
(intermediate, long term)
B
E
Noncurrent
(intermediate, long term)
C
Single-entry records only income and expense transactions
Double-entry also records changes to assets and liabilities
10.
Sources
Beginning inventory
Purchases
Production
Uses
Ending inventory
Sales
Death loss
3,150
0
?
4,000
5,500
65
9,565
9,565 – 3,150 = 6,415 head
11.
12.
800, 600, 100, 600, 700, 900
A.
B.
C.
D.
E.
F.
G.
Sold 100 large round hay bales at auction for $40 each.
(100 @ $40 = $4,000)
Annual depreciation on the hay baler was $3,000.
Paid $500 veterinary bill for treating calves.
Had 60 calves worth $500 each at the beginning of the year, and 65 calves worth $400 each at the end of
the year.
(65 x $400) – (60 x $500) = $26,000 - $30,000 = -$4,000
Sold 5 cull cows for $2,500 total.
Fed 100 tons of hay produced on the farm to the beef cow herd. Valued hay at $60 per ton.
= $6,000
Owed the bank $20,000 for cattle operating loan principal, plus $1,500 accrued interest at the beginning
of the year. At the end of the year the loan principal was $17,000 and the accrued interest was $2,000.
($2,000 – 1,500) = +$500
H.
The family butchered one steer for home consumption. They could have sold it for $750.
Income
Expenses
13.
a.
D.
E.
H.
C.
F.
G.
Beef Cows
-$4,000
$2,500
$ 750
$ 500
$6,000
$ 500
A.
F.
Hay
$4,000
$6,000
B.
$3,000
Total liabilities $202 ,070

 36 %
Total assets
$562 ,500
b. Current assets - current liabilities
= $98,950 - $62,070 = $36,880
c.
Net farm income
$51,845

 24 %
Gross farm revenue $215 ,110
d. Beginning Net Worth
+ Net Farm Income
- Family living
= Ending net worth
($335,000 + $51,845 – $360,430)
$335,000
51,845
?
$360,430
= $26,415