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Business Planning and Control

Chalk Hill Farm: Account Preparation and Analysis

The Assignment

Chalk Hill Farm is a 195 hectare mixed farm located in the Chiltern Hills of Buckinghamshire. It is an owner-occupied farm under the sole ownership of Mr Dan Lydiate. He runs a small Holstein x Angus dairy herd, and a flock of Lleyn sheep which he crosses with Texel tups. Mr Lydiate also has 50 hectares of cereal production growing wheat and barley. He sells the majority of his calves, keeping back a few heifers as replacements, but finishes the lambs after selecting out replacement ewe lambs. Mr Lydiate has asked for your assistance in the preparation of his accounts.

Please provide the following (marks in brackets):

1. A set accounts for the financial year ending 31^st March 2022. He requires a monthly cash flow statement (20%), a complete set of enterprise gross margins (15%), a profit/loss account (15%), and a balance sheet (15%).

2. An analysis of his current situation (a report of maximum 1,000 words), paying particular attention to the contribution of the different enterprises to the farm business, his cash flow, profit/loss, and balance sheet (35%).

The Submission

A word-processed (*.docx) report covering (i) the analysis of the current situation with (ii) the accompanying financial statements should be submitted on Blackboard via a Turnitin submission point by 12pm on Friday 13 January, 2022. In addition, the excel template with the solutions and the formulas used will also need to be uploaded via a separate Blackboard submission point.  

The Data: Financial year end 31^st March 2022

Mr Lydiate has supplied the following information on the farms physical and financial performance over the past year to help you with the completion of the accounts.

Land area

Total Area	195 ha
Winter Wheat	30 ha
Winter Barley	20 ha
Permanent pasture	145 ha

Valuations at start of financial year

· Land value 195ha @ £18,863/ha = £3,678,285

· Building and Fixtures WDV = £123,250 (4% Straight Line Depreciation)

· Machinery as per the details included later (11% Diminishing Balance Depreciation)

Livestock

	Opening Valuation		Closing Valuation
	No. of heads	Total Value £	No. of heads	Total Value £
Dairy Cows	50	61,250	52	63,700
Bulls	2	3,900	2	3,600
Heifers in calf	12	14,736	10	12,380
Bulling Heifers	10	7,550	9	6,120
Heifer Calves	9	3,537	11	2,981
Ewes	490	46,550	500	52,500
Rams	13	4,030	15	4,430
Ewe Lambs	115	12,305	123	15,006

Other stock

	Opening Valuation		Closing Valuation
	Quantity	Total Value £	Quantity	Total Value £
Wheat	50 t	9,250	70 t	15,260
Silage	20 t	520	15 t	390
Wheat Straw			15 t	645
Fuel	350 l	150	250 l	150
Concentrates 50% Dairy 50% Sheep	1.5 t	405	1.5 t	525

Dairy & Youngstock data

· There are an average of 51 cows in milk across the year, and each produces 8,280 litres per year

· The farm’s milk contract averages at 30.2 pence per litre through the year, and they are paid evenly each month

· 12 in-calf heifers calved during the year and joined the milking herd from the heifer rearing enterprise. At the point of transfer, they are worth £1,508 per head

· 10 dairy cull cows were sold in October, averaging £868 per head

· Calves are sold to a neighbour at approx. 4 to 6 weeks old in groups of 13, in June, October and February. The remaining 11 born within the year were kept back as replacement dairy heifers, joining the heifer rearing enterprise

· Calves average £184 per head when sold; this is also the value for transferring them into the heifer rearing enterprise

· During the winter, the cows and youngstock are housed, using some of the barley straw produced on farm (see table below), but also rely on purchasing £1,800 worth of straw in December to manage through the winter

· As well as having 2 bulls, the dairy herd also uses artificial insemination, which costs £1,080 in total, paid evenly across the 12 months

· Other costs to the cow and youngstock enterprise can be found in the table below

· Dairy and youngstock concentrate feeds are purchased evenly between November and March

· Dairy and youngstock vet costs are paid quarterly from April

Sheep data

· Lambing takes place in April & May

· Lambing percentage 170%

· 710 lambs sold finished at £108 per head between September and January in equal numbers

· 123 ewe lambs retained

· 92 cull ewes sold half in September and half in October averaging £85 per head, and 13 ewe deaths

· 1 cull rams sold in December at £105 per head, 1 ram death

· 4 new rams purchased in August for £440 each       

· Shearing £1.50 per ewe (490), paid in June

· Wool income £2.25 per ewe (490), received in September

· Other costs to the sheep enterprise can be found in the table below

· Sheep concentrates are paid evenly each month

· Sheep vet costs are paid evenly each month

· The Sheep also use some of the purchased straw and farm’s barley straw during lambing (see table below)

	Dairy Herd	Youngstock	Sheep
	Average 51 cows	Average 31 cattle	Average 495 ewes
Feed	£705 per head	£213 per head	£23 per head
Veterinary costs	£79 per head	£24 per head	£10 per head
Straw (own and purchased)	80% of total	15% of total	5% of total
Forage costs	50% of total	15% of total	35% of total

Crops

· Opening Wheat (from 2020 harvest) sold in April at £193/t

· Barley is sold at harvest (August 2021) for £167/t. The farmer also pays back what is owed for Barley seed (£86/ha) as a contra at the point of sale. The net amount received was £21,326, so would also be useful to work out the yield based on the sale

· Wheat (2021 harvest) averaged 8.1t/ha and crop sold evenly between October and February for £218/t, except for the Wheat in closing valuation

· Straw yield across the farm averaged 3.1t/ha. Wheat straw was sold at £43/t in September, apart from the straw in the closing valuation. All of the Barley straw is given to the livestock at the same value as the Wheat straw

· Silage sales of 110t at £26/t in September

· Seed is purchased in August

· Fertiliser is purchased evenly in July and March

· Crop protection is purchased evenly in April, July and November

· Crop input costs can be found in the table below

	Wheat 2021	Barley 2021	Grass
Seed	£82/ha	£86/ha	n/a
Fertiliser	£224/ha	£162/ha	£117/ha
Crop Protection	£213/ha	£167/ha	£13/ha

Subsidies

· Basic Payment Scheme received £42,444 in December

· Countryside Stewardship (CSS) payment received of £6,340 total, paid in two equal parts (July and January)

Fixed Costs

· One-man regular labour paid £12.67 per hour for 39.5 hour per week (52 weeks per year), plus over time for the year of 480 hours paid at 1.5 times the normal rate.

· Casual labour bill of £4,200 in total, paid in equal amounts monthly between April and August

· Machinery repairs payments totalling £9,300, split evenly over the year, monthly

· Occupier’s repairs totalling £5,500, paid evenly per quarter from April

· Electricity totalling £5,200, paid quarterly in arrears from June

· Water £825, paid in October

· Insurance totalling £9,300, paid monthly

· General costs totalling £2,700, paid evenly per quarter from April

· Professional fees £1,950, paid in August

· Contracting charges £4,250, paid in February

· Fuel totalling £13,640, paid evenly per quarter from April

Finance

· A loan from AMC £130,000 Paying £685 per month of which £360 is interest, the opening balance for the year is £102,680

· Current account has an agreed overdraft at 3% per annum

· Opening bank balance is -£6,750

Machinery opening valuations, purchases and sales

At the start of the financial year the farmer owned:

· A tractor valued at £43,000

· A quadbike valued at £3,200

· A telehandler valued at £25,400

· A baler valued at £13,000

· Cultivating equipment valued at £18,750

· Two trailers with a total value of £4,800

· A Land Rover valued at £7,250

· Mr Lydiate Purchased a new Baler for £26,200 and got £10,250 for trading in the old baler during February, you should include a full 12 months depreciation on the new baler.

· For the old Baler, just calculate the profit or loss on the sale from the opening value.

Private drawings

· Mr Lydiate takes £1,400 per month out of the business account as private drawings