2015 FFA FBM Test Flashcards
For the Balance Sheet of Remington Farms, the intermediate and long-term assets have two different values. These are
b.Market Value and Cost Value
The cost value of intermediate and long-term assets is equal to
cost of the asset,plus cost of improvementsthat lengthens the life of the asset minus depreciation.
Current assets include
cash, marketable securities, accounts and notes receivable, prepaid expenses, and inventories.
The net worth statement or balance sheet reveals
net worthby subtracting total liabilities from total assets.
Another term for net worth is
owner equity
What asset has the highest market value on the Remington Farms LLC, January 1, 2014 balance sheet?
Machineryand equipment
A cash accounting system does not provide a good measure of net farm income because it is easy to
a.delay revenue. b.delay expenses. c.accelerate expenses. d.accelerate revenue.
Which of the following is not one of the basic financial statements?
Monthly bank statement
How much cash will be required to make scheduled principal payments on term liabilities during 2014?
$177,566
For 2014 the line of credit or operating loan
decreased.
Accrued interest is
interest owed but not yet paid.
Examples of prepaid expenses found on the Remington Farms 2014 balance sheet include all of the following except
notes receivable
The total market value owner equity (net worth) for Remington Farms at the beginning of 2014 is
c.$2,359,938
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
amount of capital that has accumulated in the business since it began.
Why does Remington Farms have a zero value for farmland on its balance sheet?
The farmland farmed by RemingtonFarms is all owned by RemingtonReal Estate and unrelated landowners.
Net cash income for Remington Farms in 2014 was
$517,521
The net farm income from operations (net farm income) indicates that profitability for 2014 was _______________ than indicated by net cash income.
lower
Which of the following uses of cash are not recognized in the calculation of net farm income from operations?a.
Additional cash invested in the farm business.b.Principal payments made during the year.
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.)
29.3%
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.)
Retained earnings- 159505
beginning retained earnings 1868877
Calculated ending retained earnings 2028382
Usethe cash flow statement for 2014.
December, May, Nov
The $11,717 August operating surplus became an overall $63,917 cash deficit because of which of the following?
Capital purchases and loan payments in excess of capital sales and new borrowing
Which of the following is not a characteristic of an amortized loan?
The same amount of each payment is allocated to principal and interest with each payment made.
Which of the following financial statements helps managers understand the sources and uses of cash?
Statement of cash flows
Would you recommend that the farm invest in this on-farm storage facility?Circle the correct answer.
Yes
How much would the price of corn have to increase from harvest time to make the on-farm storage facility a break-even proposition?
13 cents per bushel
How much additional income would be realized with the on-farm storage compared to storing in town?
2150
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.
13 cents per bushel
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)
14800
What is the net return per acre after accounting forlabor and management?$81
81 net return / acre
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)
66.79 bu./acre
What is the break-even price per bushelto cover total direct and overhead expenses?(Calculate to the nearest cent, $xx.xx)
3.24 per bushel
What are the estimated labor-hours per acre on the barley enterprise?
0.99 hrs./acre
Partial budgets are useful in evaluating changes such as (Circle the letter infront of all correct answers.)
b. expandingan enterprise.c. buying new equipment or machinery.
18.An enterprise budget is
a statement of projected costs and returns associated with one production process, and usually in one production period.
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
competitive
The 2015 Cash Flow projection shows that the cashbalance at the beginning of the year is
226889
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.
surplus
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.
It pays down principal on the Operating Loan.
In which month is the corn sales thehighest
Feb
Cash inflow vs. outflow properly calculates net income on anaccrual basis.
F
Cash outflow is required for equipment purchases.
T
Cash inflow is supplemented by taking on new loans.
T
Cash inflow is provided by making payments on existing loans.
F
The actual year can turn out differently than the projected cash flow statement.
T
A cash flow projection is often required by a lender, but has little relevance to the farmer.
F
What are the three types of Utility? Place anX in front of them.
Form, Time, Place
King of the market
Consumer
The middlemen in the marketing system operate on
d.margin.
Elements of the past several agriculture government programs have tried to reduce the influence that the program would have on
world markets.
Price movements over time occur becauseof
demand shifts.b.supply shifts.
The most commonway that farmers do forward pricing through
cash contracts
Based on Remington Farmscorn production plan, how many corn contractsare needed to hedge thecorn?
40
Given the Crop Enterprise Analysis for Remington Farms, should RemingtonFarmsplan to grow more corn or Roundup Ready soybeans?
Roundup
A market that consistsof many buyers and sellers trading a uniform commodity like corn is called
pure competition.
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?
Make corn and wheat prices higher on world market.
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
marketing margin
A farmer who is willing to pay a set dollar amount to establish floor or base price tobe receivedwould do what?
Purchase a put option.
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?
Sell futures contracts expecting to buy them back when the corn is sold.
The only major factor that would change the price that he may receive after using the correct answer in question 13would bea
d. basis change.
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.
The earnings are distributed to membersand taxed as personal income.
A sole-proprietor farmer pays self-employment tax on income generated bywhich of the following?(Circle the letter in front of all correct answers.)
Sale of raised beef calves.Custom work done for a relative.
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
N Y N Y Y
Which of the following are tax deductible farm expenses for the cash basis, soleproprietor farmer? (Circle the letter of all correct answers.)
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
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. 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.
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.
The total amount of interest paidwould decrease.
How far a set of numbers is spread out around the mean can be measured by the
variance
Risk management is a process by which a business
a.identifies potential risk exposure.b.prioritizes the risk faced by the business.c.develops a plan to mitigate the exposure.
Managers of a farm business can use which of the following as part of their risk management strategy?
a.Avoidanceb.Transferc.Insurance
Which of the following is not a market risk?
Changes in cost of production per unit due to yield changes.
The production of several special soybean varieties is an example of what type of risk management strategy?
.Diversification
If a manager is willing to take a bigger risk, many managers would expect to receive
.a higher average net return
Which of the following risks can be protected against through the use of insurance?(Circle the letter of each correct answeror answers.)
a.Fireb.Crop failures e.A farm accident that leaves the manager with a physical disabilityf.The death of a partner or key employee
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.)
Farmland is protected from the tort liabilities of the operating unit. Avoids the double taxation experienced by some entities.
A risk assessment requires managers to consider the
magnitude of a bad outcome and the likelihood of a bad outcome.
Crop revenue insurance
protects against declines in price or yield.
Lower than average yields are an example of
production risks.
The amount of debt relative to the value of total assets is an example of
financial risks.
Which of the following are the two major advantages of an LLC?
Limited liability for individual members or owners. Generally treated as a pass through entity for taxation.
All 50 states treat LLCs the same.
F
Which of the following can be a member of an LLC? (Place an X in front of all correct answers.)
Individuals__X__Partnerships__X__Trusts__X__Estates__X__Corporations__X__Other LLCs
Which of the following formalities normally imposed upon corporations do not apply to LLCs? (Place an X in front of all correct answers.)
Produce an annual report Hold directors meetings Meet shareholder requirements
Are there tax liabilities incurred when a sole proprietorship places their assets into an LLC? (Circle the correct answer.)
No
What is the most common form of ownership for most farmers and ranchers?
Sole proprietorships
In a Limited Partnership, what are the two types of partners?
General Limited
In a Limited Partnership, which type of partner is responsible for management?
General
Investors in a Limited Partnership who do not have management responsibilities see an advantage because they have limited liability. (Circle the correct answer.)
T
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.)
T
The Term Debt Coverage Ratio measures
the ability to pay all intermediate and long term debt payments.
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.
Non-farm vehicle purchases, Miscellaneous, Cash donations
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.
Household Real estate taxes, food and meals expenses, health insurance
What can an agriculture producer determine from the Production Function?
How much to produce.
There are two economic principles that make up the Production Function.(Circle the letters in front of the the correct two answers.)
The law of diminishing returns The law of diminishing physical output.
Marginal cost measures which of the following?
The change in cost by producing another unit of output.
On the Production Function graph, the MC=MR, tells the producer?
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.
