Question

In: Accounting

Crops & feed revenue 145,600 Livestock and livestock product revenue 215,300 Total nonfarm income 12,000 Total...

Crops & feed revenue 145,600
Livestock and livestock product revenue 215,300
Total nonfarm income 12,000
Total farm operating expenses 252,629
Depreciation expense 50,526
Income tax expense 10,827
Interest expense 64,962
Withdrawals for family living 28,000
Principal payments on unpaid operating debts 0
Principal payments on current portions of debt & leases 29,890

1) Calculate capital replacement and term debt repayment capacity for LongView Farms.

2) Calculate capital replacement and term debt repayment margin (CRDRM) for LongView Farms.

3) Solve the percent that crop revenue and livestock revenue can decline and still maintain positive CRDRM.

4) Solve the percent operating expenses and interest expenses can increase and still maintain positive CRDRM.

Solutions

Expert Solution

Calculation of Net Farm Income from Operations as -

Gross Farm Revenues -

Crop and feed Revenues

Livestock and Livestock Product Revenues

$145,600

$ 215,300

$360,900

Less : - Total farm operating expenses ($252,629)
EBITDA $108,271
Less : - Interest Expense ($64,962)
Net Farm Revenue from Oprations $43309

Calculation of Capital Debt Repayment Capacity & Margin and Replacement Margin as -

Net Farm Revenue from Oprations 1 $43309
Total Non-farm Income 2 $12000
Interest Expense on Term Debt 3 0
Depreciation Expense 4 $50526
Family Expense 5 $28000
Income tax Expense - self 6 $10827

Capital Debt Replacement Capacity [(1+2+3+4)-(5+6)]

7 $67008
Principle payment of Debt & Leases 8 $29890
Unpaid Oprating Debts 9 0

Capital Debt Repament Margin [7-(3+8+9)]

10 $38000
Cash Used for Capital Replacement 11

0

Replacement Margin (10-11)

12 $38000

Term Debt & Capital Lease Coverage Ratio [7/(3+8+9)

13 224.18%

Replacement Margine Coverage Ratio [7/(3+8+9+11)

14 224.18%

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