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Farm Business Management > 2015 FFA FBM Test > Flashcards

2015 FFA FBM Test Flashcards

1
Q

For the Balance Sheet of Remington Farms, the intermediate and long-term assets have two different values. These are

A

b.Market Value and Cost Value

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2
Q

The cost value of intermediate and long-term assets is equal to

A

cost of the asset,plus cost of improvementsthat lengthens the life of the asset minus depreciation.

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3
Q

Current assets include

A

cash, marketable securities, accounts and notes receivable, prepaid expenses, and inventories.

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4
Q

The net worth statement or balance sheet reveals

A

net worthby subtracting total liabilities from total assets.

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5
Q

Another term for net worth is

A

owner equity

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6
Q

What asset has the highest market value on the Remington Farms LLC, January 1, 2014 balance sheet?

A

Machineryand equipment

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7
Q

A cash accounting system does not provide a good measure of net farm income because it is easy to

A

a.delay revenue. b.delay expenses. c.accelerate expenses. d.accelerate revenue.

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8
Q

Which of the following is not one of the basic financial statements?

A

Monthly bank statement

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9
Q

How much cash will be required to make scheduled principal payments on term liabilities during 2014?

A

$177,566

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10
Q

For 2014 the line of credit or operating loan

A

decreased.

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11
Q

Accrued interest is

A

interest owed but not yet paid.

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12
Q

Examples of prepaid expenses found on the Remington Farms 2014 balance sheet include all of the following except

A

notes receivable

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13
Q

The total market value owner equity (net worth) for Remington Farms at the beginning of 2014 is

A

c.$2,359,938

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14
Q

The balance sheets for Remington Farms divide total net worth into two parts: 1) retained earnings/contributed capital and 2) market valuationequity. Retained earnings/contributed capital represent the

A

amount of capital that has accumulated in the business since it began.

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15
Q

Why does Remington Farms have a zero value for farmland on its balance sheet?

A

The farmland farmed by RemingtonFarms is all owned by RemingtonReal Estate and unrelated landowners.

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16
Q

Net cash income for Remington Farms in 2014 was

A

$517,521

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17
Q

The net farm income from operations (net farm income) indicates that profitability for 2014 was _______________ than indicated by net cash income.

A

lower

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18
Q

Which of the following uses of cash are not recognized in the calculation of net farm income from operations?a.

A

Additional cash invested in the farm business.b.Principal payments made during the year.

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19
Q

Corn sales were the largest cash income source for Remington Farms in 2014. What percent of gross cash income does this represent? (Round to the nearest tenth of a percent.)

A

29.3%

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20
Q

The family living and income tax withdrawal reported in the Remington Farms cash flows for 2014 was $85,000. Using this amount, net farm income, and assuming no other sources of capital were added to RemingtonFarms in 2014, what are the calculated retained earnings/contributed capital at the end of 2014? (Note: because single entry cash accounting is used on most farms, the calculated retained earnings at the end of the year may not be the same as the valued reported on the balance sheet.)

A

Retained earnings- 159505
beginning retained earnings 1868877
Calculated ending retained earnings 2028382

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21
Q

Usethe cash flow statement for 2014.

A

December, May, Nov

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22
Q

The $11,717 August operating surplus became an overall $63,917 cash deficit because of which of the following?

A

Capital purchases and loan payments in excess of capital sales and new borrowing

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23
Q

Which of the following is not a characteristic of an amortized loan?

A

The same amount of each payment is allocated to principal and interest with each payment made.

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24
Q

Which of the following financial statements helps managers understand the sources and uses of cash?

A

Statement of cash flows

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25
Q

Would you recommend that the farm invest in this on-farm storage facility?Circle the correct answer.

A

Yes

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26
Q

How much would the price of corn have to increase from harvest time to make the on-farm storage facility a break-even proposition?

A

13 cents per bushel

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27
Q

How much additional income would be realized with the on-farm storage compared to storing in town?

A

2150

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28
Q

What would it cost the farm per bushel per year to store corn with the on-farm storage facility?Calculate to the nearest cent, $xx.xx.

A

13 cents per bushel

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29
Q

If the farm were to get $0.50 per bushel more for the corn after 5 months compared to selling at harvest, how much would thatincrease its annual net income? (With the on-farm storage)

A

14800

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30
Q

What is the net return per acre after accounting forlabor and management?$81

A

81 net return / acre

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31
Q

What is the break-even yield per acre required to cover total direct and overhead expenses?(Calculate to the nearest one hundredth of a bushel, xx.xx)

A

66.79 bu./acre

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32
Q

What is the break-even price per bushelto cover total direct and overhead expenses?(Calculate to the nearest cent, $xx.xx)

A

3.24 per bushel

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33
Q

What are the estimated labor-hours per acre on the barley enterprise?

A

0.99 hrs./acre

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34
Q

Partial budgets are useful in evaluating changes such as (Circle the letter infront of all correct answers.)

A

b. expandingan enterprise.c. buying new equipment or machinery.

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35
Q

18.An enterprise budget is

A

a statement of projected costs and returns associated with one production process, and usually in one production period.

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36
Q

When an increase in the level of production of one enterprise causes a reductionin the level of production in another enterprise, these two enterprises are said tobe

A

competitive

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37
Q

The 2015 Cash Flow projection shows that the cashbalance at the beginning of the year is

A

226889

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38
Q

In the month of January, they begin the year with their own cash, plus have cash income and cash expenditures including servicing of term debt. Is there a cash surplusor a cash deficit for the month of January? Circle the correct answer.

A

surplus

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39
Q

How does this cash surplus or deficit for January affect the balance of their Annual Operating Loan. Circle the letter in front of the correct answer.

A

It pays down principal on the Operating Loan.

40
Q

In which month is the corn sales thehighest

A

Feb

41
Q

Cash inflow vs. outflow properly calculates net income on anaccrual basis.

A

F

42
Q

Cash outflow is required for equipment purchases.

A

T

43
Q

Cash inflow is supplemented by taking on new loans.

A

T

44
Q

Cash inflow is provided by making payments on existing loans.

A

F

45
Q

The actual year can turn out differently than the projected cash flow statement.

A

T

46
Q

A cash flow projection is often required by a lender, but has little relevance to the farmer.

A

F

47
Q

What are the three types of Utility? Place anX in front of them.

A

Form, Time, Place

48
Q

King of the market

A

Consumer

49
Q

The middlemen in the marketing system operate on

A

d.margin.

50
Q

Elements of the past several agriculture government programs have tried to reduce the influence that the program would have on

A

world markets.

51
Q

Price movements over time occur becauseof

A

demand shifts.b.supply shifts.

52
Q

The most commonway that farmers do forward pricing through

A

cash contracts

53
Q

Based on Remington Farmscorn production plan, how many corn contractsare needed to hedge thecorn?

A

40

54
Q

Given the Crop Enterprise Analysis for Remington Farms, should RemingtonFarmsplan to grow more corn or Roundup Ready soybeans?

A

Roundup

55
Q

A market that consistsof many buyers and sellers trading a uniform commodity like corn is called

A

pure competition.

56
Q

The operator knowsthat the value of the dollar on the world market can have an impactongrain markets. If the dollar increases in value related to other currencies,it will impact U.S. corn and wheat prices in which way?

A

Make corn and wheat prices higher on world market.

57
Q

Comparing the retail price to the farm price for an agricultural commodity allows you to determine the portion of each dollar spent at the retail level that farmers receive for their commodities. The difference between retail value andthe farm value is

A

marketing margin

58
Q

A farmer who is willing to pay a set dollar amount to establish floor or base price tobe receivedwould do what?

A

Purchase a put option.

59
Q

If a producerdecides to use the futures market to hedge the price of corn to besold in the fall, what would he do in May?

A

Sell futures contracts expecting to buy them back when the corn is sold.

60
Q

The only major factor that would change the price that he may receive after using the correct answer in question 13would bea

A

d. basis change.

61
Q

Generally, unless an LLC chooses to be taxed as a corporation, it is taxed as a partnership. Remington Farms LLC did not choose to be taxed as a corporation. Circle the answer that best describes the taxation of the profits of Remington FarmsLLC.

A

The earnings are distributed to membersand taxed as personal income.

62
Q

A sole-proprietor farmer pays self-employment tax on income generated bywhich of the following?(Circle the letter in front of all correct answers.)

A

Sale of raised beef calves.Custom work done for a relative.

63
Q 
For tax years when50% bonus depreciation is available, which of the following purchases would qualify? 
Used Tractor 
New Grain bin 
Farm land 
Field tile for drainage
New multipurpose farm building
A 
N
Y
N
Y
Y
64
Q

Which of the following are tax deductible farm expenses for the cash basis, soleproprietor farmer? (Circle the letter of all correct answers.)

A

a. Seed b. Fertilizer for next year’s crop Interest paid on an operating line of credit loan Repairs made on an irrigation pump Depreciation on equipment

65
Q

Which of the following sound tax management practices might a cash basis, soleproprietor farmer consider to lower his taxable income prior to year’s end? (Circle the letter of each correct answeror answers.)

A

a. Paying some bills prior to year’s end.b. Use allowable accelerated depreciation on equipment purchasedduringthat year. Delay selling fat cattle that are ready for market.

66
Q

The purchasers are considering making monthly payments instead of annual payments. If the term of the loan remains 20 years, what impact would monthly payments have on the loan? Circle the letter in front of the correct answer.

A

The total amount of interest paidwould decrease.

67
Q

How far a set of numbers is spread out around the mean can be measured by the

A

variance

68
Q

Risk management is a process by which a business

A

a.identifies potential risk exposure.b.prioritizes the risk faced by the business.c.develops a plan to mitigate the exposure.

69
Q

Managers of a farm business can use which of the following as part of their risk management strategy?

A

a.Avoidanceb.Transferc.Insurance

70
Q

Which of the following is not a market risk?

A

Changes in cost of production per unit due to yield changes.

71
Q

The production of several special soybean varieties is an example of what type of risk management strategy?

A

.Diversification

72
Q

If a manager is willing to take a bigger risk, many managers would expect to receive

A

.a higher average net return

73
Q

Which of the following risks can be protected against through the use of insurance?(Circle the letter of each correct answeror answers.)

A

a.Fireb.Crop failures e.A farm accident that leaves the manager with a physical disabilityf.The death of a partner or key employee

74
Q

The management team has organized the farm business as two separate Limited Liability Companies (LLC). Which of the following are advantages of such an organization?(Circle the letter of each correct answeror answers.)

A

Farmland is protected from the tort liabilities of the operating unit. Avoids the double taxation experienced by some entities.

75
Q

A risk assessment requires managers to consider the

A

magnitude of a bad outcome and the likelihood of a bad outcome.

76
Q

Crop revenue insurance

A

protects against declines in price or yield.

77
Q

Lower than average yields are an example of

A

production risks.

78
Q

The amount of debt relative to the value of total assets is an example of

A

financial risks.

79
Q

Which of the following are the two major advantages of an LLC?

A

Limited liability for individual members or owners. Generally treated as a pass through entity for taxation.

80
Q

All 50 states treat LLCs the same.

A

F

81
Q

Which of the following can be a member of an LLC? (Place an X in front of all correct answers.)

A

Individuals__X__Partnerships__X__Trusts__X__Estates__X__Corporations__X__Other LLCs

82
Q

Which of the following formalities normally imposed upon corporations do not apply to LLCs? (Place an X in front of all correct answers.)

A

Produce an annual report Hold directors meetings Meet shareholder requirements

83
Q

Are there tax liabilities incurred when a sole proprietorship places their assets into an LLC? (Circle the correct answer.)

A

No

84
Q

What is the most common form of ownership for most farmers and ranchers?

A

Sole proprietorships

85
Q

In a Limited Partnership, what are the two types of partners?

A

General Limited

86
Q

In a Limited Partnership, which type of partner is responsible for management?

A

General

87
Q

Investors in a Limited Partnership who do not have management responsibilities see an advantage because they have limited liability. (Circle the correct answer.)

A

T

88
Q

Regular corporations pay tax on income. Subchapter S Corporations are structured as a corporation and file an informational tax return but do not pay taxes. (Circle the correct answer.)

A

T

89
Q

The Term Debt Coverage Ratio measures

A

the ability to pay all intermediate and long term debt payments.

90
Q

What are three (3)annual expenses that the Remingtons would most likely be able to reduce? Circle the letter in front of the correct responses.

A

Non-farm vehicle purchases, Miscellaneous, Cash donations

91
Q

What are the three (3) annual expenses that the Remingtons would find most difficult to reduce? Circle the letter in front of the correct responses.

A

Household Real estate taxes, food and meals expenses, health insurance

92
Q

What can an agriculture producer determine from the Production Function?

A

How much to produce.

93
Q

There are two economic principles that make up the Production Function.(Circle the letters in front of the the correct two answers.)

A

The law of diminishing returns The law of diminishing physical output.

94
Q

Marginal cost measures which of the following?

A

The change in cost by producing another unit of output.

95
Q

On the Production Function graph, the MC=MR, tells the producer?

A

a. The point where the losses will be the least.b. That Marginal Cost = Marginal Return.c. The point where the profits are the greatest.

Farm Business Management (5 decks)

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