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ANALISIS LEMBAR - NERACA USAHA PERTANIAN Farm Balance Sheet Analysis. AAE 320 Paul D. Mitchell. TUJUAN. Overview accounting balance sheet as it pertains to agricultural operations How to read one Methods used to prepare one: Depreciation methods How to use one (financial ratios).
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Paul D. Mitchell
4. The Basic Accounting Identity must hold:
a. Assets = Liabilities + Owner Equity
b. Owner Equity = Assets – Liabilities
5. Equity is what’s left, the residual
Recommends using both methods
1) Market basis balance sheet with cost basis asset values in attached schedules or in footnotes
2) Double Column balance sheet for assets, with market basis and cost basis
Measure true value market of your business and identify possible management problems
Total Depreciation to Allocate
Use a mathematical formula to describe how to get from Point A to Point B
Slope of the line between any two years is the annual depreciation during that year
Depreciation = DValue/Dt
Dt = 1
= (Cost – Salvage Value)/Useful Life
= (Cost – Salvage Value) x RSL
RSL = 1/Useful Life = Depreciation Rate
Example: RSL = 1/10 = 0.10 = 10%
10% annual depreciation rate
($100,000 – $40,000)/6 = $10,000
($100,000 – $40,000) x 16.7% = $10,020
($100,000 – $0)/5 = $20,000
$100,000 x 1/3 = $33,333
Problem: Basis can fall below salvage value
Machine costs $7000 with a useful life of 3 years and salvage value of $1000
1) What is the double declining balance depreciation for the 1st year?
2) What is machine’s ending basis in 1st year?
3) What is the double declining balance depreciation for the 2nd year?
4) What is machine’s ending basis in 2nd year?
Depreciation each year is the Purchase Price times the Rate from the tax table. Notice rates add to 100%, which implies take full value over “tax life” of the asset.
Current Assets/Current Liabilities
Current Assets – Current Liabilities
Requires Assets > Liabilities
Assets = Liabilities + Equity
Assets = Debts + Equity
Debt/Asset + Equity/Asset = 1, or
Equity/Asset = 1 – Debt/Asset
Debt/Asset = 1 – Equity/Asset
Debt/Equity = Debt-to-Asset/Equity-to-Asset
Debt/Asset = Debt/Equity/(1 + Debt/Equity)
Equity/Asset = 1/(1 + Debt/Equity)
Hogs 0.44 0.30 0.16
Grain 0.46 0.29 0.15
Beef 0.52 0.31 0.17
Dairy 0.50 0.36 0.23