B. Income Statement Development & Analysis

You are a farmer who has an accounting period running from January 1 to December 31, 2022. You have summarized your records into the following information. Answer the questions in this homework by using this information.

Inventory Values

January 1, 2022 December 31, 2022

Crops $33,570 $27,360

Livestock $22,440 $35,900

Revenue and Expenses

Depreciation 37,450 Crops Sold $256,920

Feed Purchased 23,100 Insurance 4,700

Property Taxes 4,925 Interest Paid 29,920

Misc. Expenses 6,300 Feeder Livestock Purch. 50,700

Market Livestock Sold 95,786 Seed Purchased 8,890

Repairs 14,900 Vet. & Health Expense 4,860

Fertilizer Exp. 11,450 Income from Custom Work 40,340

Supplies 5,161 Gain on Sale of

Labor Hired 28,560 Breeding Stock 3,130

Fuel Expense 8,630 Gov't payment income 7,500

Gain on mach. sale 1,300 Chemical exp. 13,137

Change in interest payable -4,150 Change in acct. payable +6,080

Other Information

Average Asset Value (2022) $965,000 Family Living Expenses $ 49,000

Opportunity Cost of Operator Income Tax Paid 16,675

Labor 38,560 Owner's Equity (12/31) $412,000

Opportunity Cost of Operator Average Equity Value (2022) $389,450

Management 16,300

Opportunity Cost of Capital 9.30%

2	What was Net Farm Income from Operations?
3	What was Net Farm Income?
4	Compute Return to Management:
5	Compute Return on Assets: (%)
6	What is Return on Equity (in %)?
7	What is the Operating Profit Margin Ratio?
8	How much did your equity increase or decrease during the past year?
9	What was your equity on January 1?
10	The table below includes financial measures and ratios for 2021 (the previous year). Based on these, has farm performance improved in 2022? Explain your answer. (Consider changes in each individual measure/ratio but answer for the farm as a whole.)
11	Assume it is early in the 2023 year and you are considering plans for the year ahead. Develop one SMART goal for the 2023 year and briefly describe your plan for achieving that goal.
	2021 Financial Measures
	Measure/Ratio	2021 Value
	Net Farm Income from Operations	$ 225,000.00
	Net Farm Income	$ 220,000.00
	Return to Management	$ 110,000.00
	Return on Assets	18.25%
	Return on Equity	32.00%
	Operating Profit Margin Ratio	27.75%