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Farm Accounts The following trial balance was extracted from the books of T - Leaving Cert Accounting - Question 6 - 2007
Question 6
Farm Accounts The following trial balance was extracted from the books of T. Curtin, a farmer, on 31/12/2006. Land and buildings (cost €600,000) ... show full transcript
Worked Solution & Example Answer:Farm Accounts The following trial balance was extracted from the books of T - Leaving Cert Accounting - Question 6 - 2007
Step 1
Enterprise analysis accounts for ‘Cattle and Milk’ for year ended 31/12/2006
Answer
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Income: Calculate total income from livestock sales, milk sales, and milk drawn by the family:
- Sale of Livestock: €235,000
- Sale of Milk: €126,300
- Drawing of Milk: €1,250
- Total Income = €235,000 + €126,300 + €1,250 = €362,550
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Cost of Sales: Calculate opening stock and closing stock:
- Opening Stock (Livestock): €92,000
- Closing Stock (Livestock): €74,000
- Therefore, Cost of Sales = Opening Stock - Closing Stock = €92,000 - €74,000 = €18,000
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Gross Profit Calculation:
- Gross Profit = Total Income - Cost of Sales = €362,550 - €18,000 = €344,550
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Expenditure: Farm wages and expenses split evenly:
- Total Farm Wages = €56,400 ÷ 2 = €28,200
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Total Expenditure includes costs of feedstuffs and veterinary fees:
- Feedstuffs: €16,900
- Veterinary fees and medicines: Let’s assume €1,000.
- Total Expenditure = Farm Wages + Feedstuffs + Veterinary fees = €28,200 + €16,900 + €1,000 = €46,100
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Final Gross Profit for ‘Cattle and Milk’:
- Gross Profit = Total Income - Total Expenditure = €344,550 - €46,100 = €298,450
Step 2
Enterprise analysis accounts for ‘Grain’ for year ended 31/12/2006
Answer
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Income: Calculate total income from grain sales:
- Sale of Grain: €12,920
- Total Income for Grain: €12,920 + €0 = €12,920
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Cost of Sales: Calculate opening stock and closing stock:
- Opening Stock (Grain seeds): €1,600
- Closing Stock (Grain seeds): €2,600
- Cost of Sales = Opening Stock - Closing Stock = €1,600 - €2,600 = -€1,000
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Gross Profit Calculation:
- Gross Profit = Total Income - Cost of Sales = €12,920 - (-€1,000) = €13,920
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Expenditure includes costs for fertilizer and feed:
- Fertilizer: €3,975
- Feedstuffs Allocation from total (given from part a): €16,900
- Total Expenditure for Grain = €3,975 + €16,900 = €20,875
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Final Gross Profit for ‘Grain’:
- Gross Profit = Total Income - Total Expenditure = €13,920 - €20,875 = -€6,955
Step 3
General profit and loss account for year ended 31/12/2006
Answer
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Income: Calculate total contribution from both enterprises:
- Contribution from Cattle and Milk: €298,450
- Contribution from Grain: -€6,955
- Total Income = €298,450 + (-€6,955) = €291,495
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Expenditure Overview:
- ESB: €12,920
- Loan interest: €9,900
- Depreciation (calculate separately):
- Building Depreciation on €600,000 at 3%: €18,000
- Machinery Depreciation on €120,000 at 20%: €24,000
- Thus, Total Expenditure = €12,920 + €9,900 + €18,000 + €24,000 = €64,820
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Net Profit Calculation:
- Net Profit = Total Income - Total Expenditure = €291,495 - €64,820 = €226,675
Step 4
Balance sheet as at 31/12/2006
Answer
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Fixed Assets Calculations:
- Land/Buildings: Cost €600,000, Depreciation €18,000 (3%) = Net Asset: €582,000
- Machinery: Cost €120,000, Depreciation €24,000 (20%) = Net Asset: €96,000
- Total Fixed Assets = €582,000 + €96,000 = €678,000
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Current Assets:
- Closing Stocks:
- Livestock: €74,000
- Fertilizers: €900
- Feedstuffs: €2,600
- Total Current Assets = €74,000 + €900 + €2,600 = €77,500
- Closing Stocks:
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Total Assets = Fixed Assets + Current Assets = €678,000 + €77,500 = €755,500
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Liabilities Overview:
- Creditors within the year: €4,500 + €256,070
- Capital Account:
- Capital: €245,000
- Net Profit: €226,675 (from part b)
- Total Liabilities = €488,710
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Balance Sheet Final Assessment:
- Assets - Liabilities = Total Balance = €755,500 - €488,710 = Net Assets: €266,790