Depreciation and Corn
This memorandum provides the financial positions of Pemsah’s and Sihathor’s farm after one year of harvest. Part I discusses the policies and procedures for the statement of operations, the corn flows statement, and performance measures. Part II consists of the policies and procedures for the statement of position, the performance measures for statement of position, and the effects of the mice problem on all three statements.
PART I
Policies and Procedures for Statement of Operations We prepared statements of each farm’s operations that illustrate the performances of the farms, in terms of sacks of corn, during the first harvest year. Income before Royal Taxes is equal to the harvested sacks of corn less operating costs. Sihathor’s farm harvested 48,600 sacks of corn during the year and had a total operating cost of 12,317 sacks of corn, which resulted in income before Royal Taxes of 36,283 sacks of corn. Pemsah’s farm harvested 35,300 sacks of corn and had a total operating cost of 8,080 sacks of corn, which resulted in income before Royal Taxes of 27,220 sacks of corn. Amenhotep required a Royal Tax of one out of every four sacks of the yearly harvest to be paid at the end of the year. Sihathor paid 12,150 sacks of corn in Royal Taxes, which gave him a net income of 24,133 sacks of corn. Pemsah paid 8,825 sacks of corn in Royal Taxes, which gave him a net income of 18,395 sacks of corn. Financial accounting policies and procedures helped to make the statements of each farm’s operations relevant and reliable. The straight-line depreciation method depreciated the oxen, farm implements, and building over their useful lives. For example, the cost of purchasing the oxen divided by their expected life yielded the yearly depreciation amount applied for the oxen. Due to the death of Sihathor’s worker, he granted the worker’s widow an annuity of one sack of corn per lunar cycle for the rest of her life. The present value of this annuity was 95 sacks of corn, which
PART I
Policies and Procedures for Statement of Operations We prepared statements of each farm’s operations that illustrate the performances of the farms, in terms of sacks of corn, during the first harvest year. Income before Royal Taxes is equal to the harvested sacks of corn less operating costs. Sihathor’s farm harvested 48,600 sacks of corn during the year and had a total operating cost of 12,317 sacks of corn, which resulted in income before Royal Taxes of 36,283 sacks of corn. Pemsah’s farm harvested 35,300 sacks of corn and had a total operating cost of 8,080 sacks of corn, which resulted in income before Royal Taxes of 27,220 sacks of corn. Amenhotep required a Royal Tax of one out of every four sacks of the yearly harvest to be paid at the end of the year. Sihathor paid 12,150 sacks of corn in Royal Taxes, which gave him a net income of 24,133 sacks of corn. Pemsah paid 8,825 sacks of corn in Royal Taxes, which gave him a net income of 18,395 sacks of corn. Financial accounting policies and procedures helped to make the statements of each farm’s operations relevant and reliable. The straight-line depreciation method depreciated the oxen, farm implements, and building over their useful lives. For example, the cost of purchasing the oxen divided by their expected life yielded the yearly depreciation amount applied for the oxen. Due to the death of Sihathor’s worker, he granted the worker’s widow an annuity of one sack of corn per lunar cycle for the rest of her life. The present value of this annuity was 95 sacks of corn, which