(a) Explain briefly the term farm valuation. (b) Prepare a Profit and Loss Account for a farm from the following information: maize seeds for planting - N25...
Question 1 Report
(a) Explain briefly the term farm valuation. (b) Prepare a Profit and Loss Account for a farm from the following information:
maize seeds for planting - N25,000.00
fertilizers used - N14,800.00
pesticides - N20,000.00
purchase of seed yams - N50,000.00
tractor hire - N60,000.00
transport cost - N10,000.00
workers' wages - N40,000.00
sale of maize cobs - N250,000.00
yam tubers sold - N200,000.00
opening valuation - N440,000.00
closing valuation - N200,000.00
Answer Details
(a) Farm valuation
Farm valuation is the process of estimating or determining the monetary value of a farm and its assets (land, buildings, livestock, produce and equipment) at a particular point in time.
(b) Profit and Loss Account of the farm
| Expenditure (Dr) | Amount (N) | Income (Cr) | Amount (N) |
|---|---|---|---|
| Opening valuation | 440,000.00 | Sale of maize cobs | 250,000.00 |
| Maize seeds for planting | 25,000.00 | Yam tubers sold | 200,000.00 |
| Fertilizers used | 14,800.00 | Closing valuation | 200,000.00 |
| Pesticides | 20,000.00 | Net loss (c/d) | 9,800.00 |
| Purchase of seed yams | 50,000.00 | ||
| Tractor hire | 60,000.00 | ||
| Transport cost | 10,000.00 | ||
| Workers' wages | 40,000.00 | ||
| Total | 659,800.00 | Total | 659,800.00 |
Total expenditure = N659,800.00; total income (sales plus closing valuation) = N650,000.00. Since expenditure exceeds income, the farm made a net loss of N9,800.00 (659,800 - 650,000), which is entered on the credit side to balance the account.
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