A farm family grows crops in the Kabwe district of Zambia for the rotation shown in the
following table:

 

a. Calculate the total income per hectare for the various crops and the total variable costs for the various crops.

The amount of interest received was estimated to be K 204,480.
Overhead or fixed cost were estimate as follows:
Owner operator’s labour and management K 1,750,000
Administrative costs K 1,000,000
Depreciation of assets K 144,000
Interest on loans was estimated at K 337,000
The amount of tax was estimated at 30% of the estimated Net Profit.
b. Calculate the estimated operating profit, net profit and increase in owner’s equity for the farm
business over the year.
You need to check that the increase in equity calculated above is the same as that which is
calculated from balance sheets for the farm business.
Assets at the beginning of the year include value of the land being K 9,500,000, depreciable
assets of K 1,440,00 and cash of K 1,000,000.
Liabilities at the start of the year are a bank loan of K 2,250,000.
c. Prepare a balance sheet at the start of the year and Calculate equity as a percentage of total assets at the beginning of the year.
Depreciation is at the rate of 10% of the value of assets at the beginning of the year.
Repayment of loan is at 10% of the value of the loan at the beginning of the year.
d. Calculate estimated net cash flow during the year and Calculate cash on hand at the end of the year.
e. Prepare a balance sheet for the farm at the end of the year. and Calculate estimated increase in equity over the year. (Should be the same as that calculated previously).
f. At the end of the year, calculate the value of equity as a percentage of total assets.
g. Calculate the percentage efficiency of the farm over the year.
h. Calculate the gearing ratio of the farm at the end of the year and Comment on the expected health of the farm business for the year.

 

Transcribed Image Text:

Crop Hectares Yield/ha Price/tonne Variable costs tonnes K K Soy beans 160 3.0 4,000 5,980 Maize 320 4.5 2,000 4,250 Sunflower 160 2.5 4,500 4,280 Cassava 160 10.5 1,200 5,260 Crop Hectares Yield/ha Price/tonne Variable costs tonnes K K Soy beans 160 3.0 4,000 5,980 Maize 320 4.5 2,000 4,250 Sunflower 160 2.5 4,500 4,280 Cassava 160 10.5 1,200 5,260

Answer rating: 100% (QA)

Ansa Ansb Increase in Owners equity Net Profit for the current Y... View the full answer