Theory question 106
Farm Management and Records(a) Using the information below, prepare a profit and loss account for Wellness Farms for the year ended 31st December 2016.
Opening valuation N400,000
Cost of point-of-lay N200,000
Cost of feed N150,000
Cost of drugs N10,000
Transportation costs N10,000
Wages paid to workers N80,000
Sale of eggs N240,000
Sale of spent layers N100,000
Eggs consumed by farmer N10,000
Closing valuation N600,000
(b) Mention five problems faced by financial institutions in granting credit to crop farmers.
(c) State four characteristics of Centrosema pubescens.
Show the model answer
(a) Debit (expenditure): opening valuation 400,000; point-of-lay 200,000; feed 150,000; drugs 10,000; transport 10,000; wages 80,000; total N850,000. Credit (income): sale of eggs 240,000; sale of spent layers 100,000; eggs consumed by farmer 10,000; closing valuation 600,000; total N950,000. Net profit = 950,000 − 850,000 = N100,000.
(b) Any five: farmers lack collateral; high risk from weather, pests and diseases; poor or no farm records; small, scattered farms; illiteracy of farmers; loan diversion and default; long gestation of some crops; high cost of administering small loans.
(c) Any four: a perennial legume; trailing/climbing habit with trifoliate leaves; fixes nitrogen; high protein forage; shade tolerant; good cover crop that controls erosion and weeds; purple/mauve flowers; tolerates fairly acidic soil.
Put opening valuation and costs on the debit side, sales and closing valuation on the credit side.