2.02 Record Keeping Review

If a cut flower grower has a $500,000.00 mortgage on her land and buildings, and she owes Farm Credit Service $60,000.00 for this year’s mortgage payment, what amount should be entered on the current liability line of the financial statement?

• $60,000.00

• $440,000.00

• $500,000.00

• $560,000.00

Answer explanation

Remember: Current liabilities are debts that are due to be paid this year.

The part of a net worth statement that shows all debts is:

• current liabilities.

• the debt-to-equity ratio.

• the inventory.

• total liabilities.

Answer explanation

Remember: Net Worth = Total Assets - Total Liabilities

Remember: Liability is the same as Debts

On a financial statement, items that can be quickly converted to cash or that will be sold within 12 months are:

• current assets.

• current liabilities.

• equity.

• equity.

Answer explanation

Examples: Cash, Savings, Checking, Greenhouse Plants

On a financial statement, net worth is:

• current assets minus current liabilities.

• current liabilities plus current assets.

• total assets minus total liabilities.

• total assets plus total liabilities.

Answer explanation

Remember: Net means something is subtracted

Remember: Net Worth = Total Assets - Total Liabilities

If a nursery owner has a $250,000.00 mortgage on his land and he owes Farm Credit Service $30,000.00 for this year’s payment, what amount should be entered on the noncurrent liability line of the financial statement?

• $30,000.00

• $220,000.00

• $250,000.00

• $280,000.00

Answer explanation

Remember: Debts are what you OWE (liability)

Remember: Noncurrent liabilities are debts NOT due this year

Example: Mortgages and other debts not including this year's payment

If a plant farm has total assets of $500,000 and total liabilities of $300,000, what number is the correct entry on the net worth line of a financial statement?

• $200,000

• $300,000

• $500,000

• $800,000

Answer explanation

Remember: Net Worth = Total Assets - Total Liabilities

Mortgages that are not due this year are entered on a financial statement as:

• current assets.

• current liabilities.

• noncurrent assets.

• noncurrent liabilities.

Answer explanation

Remember: Noncurrent Liabilities are debts that are NOT due this year.

If a bedding plant grower’s inventory shows plants worth $40,000, supplies worth $1,000, and land valued at $200,000, what amount should be entered on the non-depreciable inventory line of the financial statement?

• $400

• $41,000

• $200,000

• $241,000

Answer explanation

Remember: Non-depreciable are for items that will be sold or used within a year.

Remember: Land is NOT depreciable property.

On a net worth statement, net worth is the same as:

• current assets.

• equity.

• inventory.

• total liabilities.

Answer explanation

Remember: Equity is the difference between assets and liabilities.

Sarah has $2,500 in her checking account. What would this count as on her net worth statement?

• current asset

• current liability

• noncurrent asset

• noncurrent liability