Baron Coburg1

Long ago in a land far away there lived a feudal landlord by the name Baron Coburg. The Baron was responsible for the well being of the many peasants who lived upon the land. Each spring the Baron had to decide who would do the farming to provide food to feed his many subjects. The Baron knew that it would take 30 acres, each worth 5 bushels of wheat if he were to sell the land, in order to produce enough wheat for the coming year.2 The Baron was not quite sure who should do the farming, but decided his best option would be to select Ivan and Peter. Wherefore the Baron summoned the two to his quarters. Ivan, you will farm on the 20-acre plot of ground and Peter will farm the 10-acre plot, the Baron began. I will give Ivan 20 bushels of wheat for seed and 20 pounds of fertilizer.3 Peter will get 10 bushels of wheat for seed and 10 pounds of fertilizer. I will give each of you an ox to pull a plow, but you will have to make arrangements with Robert the Plowmaker for a plow.4 Come back next fall and return the oxen and the plows, along with your harvest. Ivan and Peter returned after the harvest was complete. Ivan spoke first. Baron Coburg, I present you with a slightly used ox, an plow broken beyond repair, and 223 bushels of wheat. I still owe Robert the Plowmaker three bushels of wheat, the cost of the plow I bought from him. I used all the seed and fertilizer. I also wish to remind you that you took 20 bushels of my harvest for your personal use. Peter spoke next. Here is a partially used ox, the plow for which I fully paid Robert 3 bushels of wheat, and 105 bushels of wheat. I also used all the fertilizer and seed. In addition, I wish to remind you that you took 30 bushels from my harvest for your own table. I believe the plow is good for two more seasons. You each did well, said the Baron. With that, Ivan and Peter left. The Baron was deep in thought. Yes, they each did well, but who did better? Required: 1. For each farm, prepare balance sheets as of the beginning and end of the growing season, along with an income statement for the growing season. 2. Who was the better farmer and why?

1 2

Adapted from a case by the same name published in the Accounting Review. We will be using bushels of wheat as a common currency in the preparation of financial statements. 3 Twenty pounds of fertilizer are worth two bushels of wheat. 4 The oxen are three years old and therefore should be able to be used for another 10 years of farming. An ox is worth 40 bushels of wheat.