4. Use the following information to compute values for each of the following ite

Question

4. Use the following information to compute values for each of the following items. Net Farm Income Average Equity Average Asset Value Interest Expense Total Revenue Opportunity Cost of Labor Opportunity Cost of Management Family Living Expenses $ 16,000 $ 8,000 $ 20,000 S 40,000 $ 220,000 $ 300,000 S 11,000 Income and Social Security Taxes $40 $ 115,000 Opportunity Cost of Capital 10% a) Rate of return on assets b) Rate of return on equity c) Operating profit margin ratio d) Change in equity e) Return to labor and mmuu

Explanation / Answer

1. False - Prepaid expenses Shall be considered as expense in the year for which they belong to. In current year, it will be considered as asset.

6. True - depreciation is the value of asset written off in multiple years and total value of depreciation can not be different although amount of depreciation in various methods may vary.

8. Straight line

11. Book value = It means total assets cost - accumulated depreciation over the years. Balance sheet will show this amount.

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