4.1.3 [Inventory of Farm Resources]

Question 1

FARM INVENTORY

Answer 1

1. detailed list of all farm resources at specific time point, with assigned values each
2. essential at the beginning and end of season/year
3. distribution of capital invested in the business

Question 2

STEPS IN INVENTORY TAKING

Answer 2

1. list all farm properties and receivables
2. assign values to each property and receivable
3. list all sources of farm debts
4. assign values to each source of debt

Question 3

ASSET VALUATION METHODS

Answer 3

1. original cost
2. farm production cost
3. net market value (selling price)
4. present market value
5. normal market value (average selling price)
6. original cost less accumulated depreciation
7. replacement cost less accumulated depreciation
8. income capitalization

Question 4

ORIGINAL COST

Answer 4

1. value at the time it was bought
2. items purchased recently with short lifespan
3. e.g. farm supplies; feeds; fertilizer

Question 5

FARM PRODUCTION COST

Answer 5

1. item produced in farm
2. enterprise record must be available
3. e.g. standing crops; raised livestock

Question 6

NET MARKET VALUE

Answer 6

1. items to be sold in relatively short period of time as part of business activities
2. incurs marketing cost
3. e.g. grain; feeder; livestock

Question 7

PRESENT MARKET VALUE

Answer 7

1. items intended to be sold at the time inventory is conducted
2. marketing cost = 0
3. e.g. home-grown crops and livestock aside from home consumption

Question 8

NORMAL MARKET VALUE

Answer 8

1. items whose values change more frequently
2. averaging should be done for each inventory period
3. e.g. land; working animals

Question 9

ORIGINAL COST LESS ACCUMULATED DEPRECIATION

Answer 9

1. for depreciable assets
2. e.g. vehicles; machinery; buildings; livestock; land improvements

Question 10

INCOME CAPITALIZATION

Answer 10

1. items expected to generate more income
2. considers time value of money
3. e.g. land

Question 11

DEPRECIATION METHODS

Answer 11

1. straight line method
2. declining balance method
3. sum-of-the-year’s digit method

Question 12

STRAIGHT LINE METHOD

Answer 12

1. same annual depreciation for each full year
2. items with uniform productive service regardless of its age
3. e.g. buildings; fences

Question 13

DECLINING BALANCE METHOD

Answer 13

1. high values of depreciation on the first years and lower values when item is old
2. items more efficient when new than when old
3. e.g. tools; equipments; machineries

Question 14

SUM-OF-THE-YEAR’S DIGIT METHOD

Answer 14

1. higher annual depreciation in first year and declines by constant amount each year thereafter