Question

Complete a balance sheet on a separate page using the information below compiled by Rhonda on January 22, 2019.

Grain on hand

3500 bu. @ $5.00 per bu.

Hay on hand

100 tons @ $80.00 per ton

Growing wheat

200 acres @ $69.80 per acre

Farm mortgage (due/4/1/19)

$13,000 principal

$10,000 accrued interest

balance after 4/01/19 payment $260,000

Buildings & improvements

$68,000

Note payable on feeder cattle (all due 4/15/19)

$45,000

Calves (to be sold in May 2019)

100 head @ $605 per head

Feeder cattle (to be sold in 60 days)

125 head @ $800 per head

Note payable at bank (all due 3/1/019)

$82,000

Vehicles

$30,500

Other machinery & equipment

$130,500

Loan on beef cows (due 10/01/19)

$12,000 principal,

$2,200 accrued interest

balance after 10/1/15 payment $34,000

Land (present market value)

1000 acres @ $1800 per acre

Beef breeding cows

110 head @ $1000 per head

Bulls

4 head @ $2,200 each

Checking account balance

$33,400

Account payable at Joe's Feed & Seed

$6,500

Account receivable

$3,600

Shop Equip. (welder, lathe, drill press, etc.)

$5,000

Corporate Stock

100 shares @ $90 per share

Other Information

1)

Has paid in advance for $6,000 worth of feed in order to get a good price on it. The feed will be delivered in May, 2019.

2) Income and social security taxes on 2018 income (not yet paid) are estimated at $14,200.

3)Rhonda contributed $590,000 to get her business started.

4) Retained earnings since the beginning of the business equals $655,000.

3

1.

What is Rhonda's owner's equity as of January 22, 2019?

Answer_________

2.

How much working capital does Rhonda have?

Answer__________

3.

What is her current ratio?

Answer__________

4.

What is her debt/asset ratio?

Answer___________

5.

What is her debt/equity ratio?

Answer___________

6. What is her equity/asset ratio?

Answer___________

7.

Assume you are a financial consultant hired by Rhonda to analyze her financial

condition. Based on this balance sheet, what part of her financial condition is most in need of

improvement? WHY?

8.

What does this balance sheet tell you about the amount of profit Rhonda made in 2013?

Explain your answer.

4

9.

Rhonda wants to borrow $40,000 from the bank to buy additional beef breeding cows.

They will cost $40,000. Assume the loan is made, the cows are purchased.

a)

What will Rhonda's owner's equity be immediately after the transactions are

completed if there are no other changes on her balance sheet?

Answer_________

b)

What will her debt/asset ratio be?

Answer___________

c)

What will be her debt/equity ratio be?

Answer__________

10.

If you were Larry Loanmaker, would you lend Rhonda the money? Why?

Answer 1

	Balance sheet of Rhonda
Liabilities	$	Assets	$
Capital contributed	590,000	Non Current Assets
Retained Earnings	655,000	Buildings & improvements	68,000
		Vehicles	30,500
Non-Current Liabilities		Other machinery & equipment	130,500
balance after 10/1/15 payment	34,000	Land (present market value)	1,800,000
balance debts (balancing figure)	1,246,860	1000 acres @ $1800 per acre
		Current Assets
Current Liabilities		Grain on hand	17,500
Note payable on feeder cattle (all due 4/15/19)	45,000	3500 bu. @ $5.00 per bu.
Note payable at bank (all due 3/1/019)	82,000	Hay on hand	8,000
Loan on beef cows (due 10/01/19)		100 tons @ $80.00 per ton
$12,000 principal,		Growing wheat	13,960
$2,200 accrued interest	14,200	200 acres @ $69.80 per acre
Account payable at Joe's Feed & Seed	6,500	Farm mortgage (due/4/1/19)
Income and social Security tax	14,200	$13,000 principal
		$10,000 accrued interest	23,000
		balance after 4/01/19 payment $260,000	260,000
		Calves (to be sold in May 2019)	60,500
		100 head @ $605 per head
		Feeder cattle (to be sold in 60 days)	100,000
		125 head @ $800 per head
		Beef breeding cows	110,000
		110 head @ $1000 per head
		Bulls	8,800
		4 head @ $2,200 each
		Checking account balance	33,400
		Account receivable	3,600
		Shop Equip. (welder, lathe, drill press, etc.)	5,000
		Corporate Stock	9,000
		100 shares @ $90 per share
		Advances for feed	6,000
Total	2,687,760	Total	2,687,760
1. Calculation of Owners Equity
Capital contributed	590,000
Retained Earnings	655,000
	1,245,000
2. Calculation of Working capital
Current Assets	658,760
Current liabilities	(161,900)
	496,860
3. Calculation of Current Ratio
Current Assets	658,760
Current liabilities	161,900
Current Ratio	4.0689
4. Calculation of Debt/ Asset Ratio
Debt	1,280,860
Assets	2,687,760
Debt/ Assets ratio	0.4766
5. Calculation of Debt/ Equity Ratio
Debt	1,280,860
Equity	1,245,000
Debt/ Equity Ratio	1.0288
6. Calculation of Equity/Asset Ratio
Equity	1,245,000
Assets	2,687,760
Equity/Assets Ratio	0.4632