Income Statement

The total depreciation over an asset's useful life is equal to: a) cost minus salvage value b) cost plus savage value c) book value d) salvage value

a

To most accurately analyze the profitability of individual enterprises on the farm, income and expenses should be summarized: a) over the production period b) over the calendar year c) monthly d) over the tax filing year

a

Which of the following assets is not depreciable? a) land b) breeding stock c) grain bin d) machinery

a

record income when it is produced record expenses when they are incurred

accrual accounting

Net farm income from operations minus an opportunity cost for unpaid family labor and management divided by average net worth (equity) is defined as: a) working capital b) rate of return on equity c) operating profit margin ratio d) rate of return on assets

b

_____ is the rate of return on the owner's share of the capital invested. a) ROA b) ROE c) profitability d) solvency

b

Depreciation is shown on which financial statements?

balance sheet, income statement, cash flow statement and statement of owner equity

Which of the following items is not included in an income statement? a) revenue b) profits c) assets d) expenses

c

record income when it is sold record expenses when paid

cash accounting

cash net farm income =

cash income-cash expenses

Profitability refers to: a) the degree to which all debts are secured. b) the degree to which debt obligations coming due in the next 12 months can be paid from cash or assets that will be turned into cash. c) the financial claim by owners on the total assets of the business. d) the difference between income and expenses.

d

recognizes that capital assets are used up over time, yearly decline in asset value as the annual expense, no cash flow happens

depreciation

depreciation =

initial cost-salvage value / years of ownership life

operating profit margin ratio =

operating profit/gross revenue

ROA =

return to assets/average assets

ROE =

return to equity/average equity

profit =

revenue-expenses

Depreciation reflects the decline in values of an asset over time due to wear and tear, age and obsolescence. True False

true

Only revenue and expenses are recorded on income statement. True False

true

Receipt of hay in exchange for haying services is recorded as revenue on the net income statement. True False

true

Retained farm earnings can be used to either increase assets or pay off liabilities, directly affecting a farm's equity level. True False

true

measures profitability with a ratio obtained by dividing the dollar value to assets by the average value for the year

ROA

return on all assets or capital invested in the business

ROE