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WorksheetsTest D
Total questions: 140
Worksheet time: 1hrs 10mins
A farm business accounting period for July 1, 2010 to June 30, 2011 would be an example of what type of accounting period?
Calendar year accounting period
Fiscal year accounting period
Monthly accounting period
Quarterly accounting period
What are the steps in the control function of farm management?
Establish standards for comparing results; measure the actual performance of the farm business; identify problem areas and take corrective action
Calculate assets; calculate net worth; calculate liabilities
Assessing the farm; analyzing revenues; analyzing expenses
Establishing the farm; measuring the wealth of the farmer; identify the problems the farmer has
with equipment
Depreciation is a cost associated with which of the following assets?
Farm land
Cattle feed
Dairy barn
Liquid fertilizer
Assume a new tractor is purchased on January 1 for $124,000 and given a salvage value of $20,000 and a useful life of 8 years. What would the annual depreciation be per year under the straight-line method?
$15,500 per year
$49,600 per year
$61,995 per year
$13,000 per year
Which of the following is an investment activity?
Pay principal on a loan
Purchase a pickup
Pay interest on a loan
All of the above
Which of the following is an operating activity?
Pay cash for tractor repairs
Charge $12,000 of feed
Sell corn for $35,000
All of the above
Agricultural processors will probably want more uniform products in the future in order to __________ .
Pay lower prices to producers
Diversify their product line
Reduce environmental contamination
Make more efficient use of processing and packaging equipment
By forming strategic alliances, small and medium-sized farmers and ranchers can __________ .
Increase their marginal freedom
Achieve advantages of diversification
Achieve marketing advantages that larger operations enjoy
Increase their own volume of production
The most common form of farm business organization is the __________ .
Sole proprietorship
Partnership
Limited Liability Company
Corporation
In a cooperative, shareholders have voting rights __________ .
In proportion to the number of shares owned
In proportion to the amount of business done with the cooperative
In the proportion to the capital contributed
That are equal for all members
In a farm partnership, net income is shared in proportion to __________ .
The labor contributed by each partner
The total costs paid by each partner
The ownership shares of each partner
The number of partners
A limited liability company combines the legal aspects of __________ .
A sole proprietorship and a partnership
A partnership and a corporation
A corporation and a cooperative
A sole proprietorship and a corporation
A “limited” partnership is one in which __________ .
Some partners do NOT participate in management, and have limited liability
The maximum number of acres farmed is fixed by law
The number of partners must not exceed 75
Only one type of enterprise is carried out
Estate planning is most concerned with passing on the __________ of the farm to the next generation.
Income
Ownership
Management
Debt
A parent and child who were starting a farm together would most likely double the size of their cow herd and milking parlor if their ultimate goal was to end up with __________ .
A “spin-off” operation with the child farming separately from the parents
The parents retiring in a few years and renting the farm to the child
A family farming corporation with both parents and child actively involved
The child working full-time off the farm
In a joint operating agreement, gross income is shared in proportion to each person’s contribution to __________ .
Total labor
Total costs
Total assets
Total liabilities
The number of shares of stock received by each stockholder when a farm corporation is formed is based on the __________ contributed by each stockholder.
Value of equity
Value of total liabilities
Amount of labor
Value of total assets
Estimating the total amount of operating credit that will be owed at the end of each time period during the year is useful for __________ .
Projecting farm’s net worth at the end of the year
Comparing to the maximum balance on an operating line that a lender will approve
Scheduling crop and livestock marketing
Estimating the farm’s net income for the year
Low profitability can be caused by __________ .
Low yields or output levels relative to input use
Unused machinery capacity with high levels of machinery ownership cost relative to output
Poor marketing leading to low prices received
All of the above
A trend analysis for a farm business could be performed using what kind of data for comparison?
Historical data from the same farm for the past five years
Data from comparable farms in the same region for the same year
Expected results from a whole farm budget completed at the beginning of the year
Historical data from similar farms in the same region for the past five years
In general terms, efficiency refers to __________ .
The volume of resources utilized in the farm business
The ratio of total liabilities to total assets in the business
The net farm income generated by the farm business
The volume of production generated per unit of resource utilized in the farm business
Two similar firms could have the same return to management but different net farm income due to __________ .
Differences in price received for products sold
Differences in price paid for inputs purchased
Differences in amount of unpaid labor and equity capital contributed
Differences in physical efficiency
Depreciation is a cost associated with which of the following assets?
Livestock feed
Nitrogen fertilizer
A machinery storage shed
Corn silage stored in a silo
A depreciable asset’s book value will equal its salvage value __________ .
Only on the purchase date
Only at the midpoint of its useful life
Only at the end of its useful life
Every year of its useful life
The depreciation method with the smallest annual depreciation in the first year of life is __________ .
Straight line
Double declining balance
150% declining balance
All depreciation methods have same amount
To be depreciable, an asset must have a useful life of __________ .
More than ten years
Five years or more
More than one year
Six months or longer
The total depreciation over an asset’s useful life is equal to __________ .
Cost minus salvage value
Cost plus salvage value
Book value
Salvage value
The proper term for the value found by subtracting accumulated depreciation from the asset’s original cost is __________ .
Salvage value
Market value
Book value
Use value
Which of the following CANNOT be valued using the cost less accumulated depreciation method?
Tractor
Barn
Purchased dairy cow
Land
The depreciation method with the greatest depreciation in the first year is __________ .
Double declining balance
150% declining balance
straight line
All of the above have the same amount
According to the cash accounting method, expenses are recorded __________ .
When they are paid
When they are accrued
At the end of the month
All of the above
When something is purchased and paid for in a year before it will be used to produce income it is called a(n) __________ .
Accrued expense
Account payable
Prepaid expense
Account receivable
Using double entry accounting, transactions can be posted to which accounts?
Only income and expense
Only assets and liabilites
Income, expense, asset and/or liabilities
Only cash and noncash
The Farm Financial Standards Council (FFSC) __________ .
Reviews loan applications
Recommends uniform procedures and standards for preparing farm financial statements
Recommends changes in farm tax regulations in the Internal Revenue Service
Sets financial goals for different types of farms and ranches
A major advantage of accrual accounting over cash accounting is __________ .
A more accurate estimate of annual profit
Simplicity
Always a higher profit
Can use single entry instead of double entry
At the end of the year, a farmer has an unpaid bill at the local machinery repair shop. It would be shown in an accrual accounting system as a(n) __________ .
Prepaid expense
Account receivable
Account payable
Accrued expense
An organization that develops and publishes guidelines for farm financial analysis and reporting is called the __________ .
Farm Accounting Association
Farm Credit System
Agricultural Analysis Association
Farm Financial Standards council
One advantage of a double-entry accrual accounting system over a single-entry cash system is __________ .
It is easier to enter transactions
A current balance sheet is always available
Noncash transactions do NOT need to be entered
It can be done on a computer
Which of the following would NOT be recorded when using a single-entry, cash accounting system?
Charging $2,000 worth of chemicals at the farm supply store
Billing a neighbor $850 for baling hay
Recognizing that $3,476.34 of interest has accrued since the last interest payment
All of the above
A prepaid expense is one where payment is made __________ .
By check
In an accounting period prior to the one in which the item will be used to produce income
In a series of payments over time
Before the bill is even received
When using cash accounting which of the following accounts would never be used?
Grain sales
Depreciation
Fertilizers purchases
Accounts payable
Selling grain from storage would be which type(s) of farm business activity?
Operating
Investment
Financing
Operating and Investment
A fiscal accounting period is one which __________ .
Covers January 1 through December 31
is only 3 months in length
Ends on any date other than December 31
Can only be used by government agencies
The statement “To achieve an average feed conversion rate of 2.75 pounds of feed per pound of gain for my market hogs by 2007” is __________ .
A mission statement
A goal
A strategy
An example of external scanning
A mission statement is __________ .
A list of important jobs the farm manager needs to accomplish in the near future
A comprehensive plan to reshape the farm business over the next decade
A set of goals to be achieved by a specific date
A short summary of why a business exists
Which phase of the strategic management process would be most influenced by a farm family’s basic values and attitudes about agriculture?
External scanning
Internal scanning
Setting goals
Strategic development
The term describing how much time is available to make a decision is __________ .
Imminence
Revocability
Frequency
Importance
One characteristic that makes decision making in agriculture different from other types of business is __________ .
More government regulation
Prevalence of very large business units
Predictability of production processes
Fixed supply of a major resource such as land
External scanning could include assessing __________ .
The financial condition of the business
Changes in consumer tastes
The basic values of the managers
Productivity of the farmland owned
“What managers do” is best described by which of the following?
Gather information
Make decisions
Analyze data
Organize the farm
Which of the following is an example of a tactical decision?
Balancing a livestock ration
Forming a partnership with a relative
Joining a feeder pig cooperative
Installing an irrigation system
Which of the following is an example of a strategic decision?
Determining fertilizer levels for crops
Deciding when to sell grain
Determining what type of business/legal organization to use
Setting milking times for a dairy
“Doubling the number of acres farmed in 10 years” is an example of a __________ .
long-run goal
short-run goal
mission statement
decision
A short summary of why a particular business is in operation is called __________ .
Internal scanning
External scanning
A mission statement
Whole farm plan
Which of the following shows the proper sequence of management functions as they would be applied to a specific problem?
Planning, control, implementation
Planning, implementation, control
Control, planning, implementation
Control, implementation, planning
Which function of management is concerned with monitoring the results of a decision and taking corrective actions?
Planning
Implementation
Control
Organization
Marginal cost measures which of the following?
The output cost form production at the average level of input
The change in cost from one enterprise to another
The change in cost by producing another unit of output
The change in cost by producing another unit of input
What is the most common form of ownership for most farmers and ranchers?
Corporations
Sole proprietorships
Partnerships
Cooperative
How far a set of numbers is spread around the mean can be measured by the __________ .
Variance
Skewness
Frequency
Modality
A sole-proprietor farmer pays self-employment tax on income generated by which of the following?
Sale of old equipment
Sale of cull stock cows
Sale of raised beef calves
Sale of farm land
If a producer decides to use the futures market to hedge the price of corn to be sold in the fall, what would he/she do in May?
Buy futures contracts expecting to buy more contracts when the corn is sold
Buy futures contracts expecting to sell those contracts when the corn is sold
Sell futures contracts expecting to buy them back when the corn is sold
Sell futures contracts expecting to sell more contracts when the corn is sold
A market that consists of many buyers and sellers trading a uniform commodity like corn is called __________ .
A monopoly
Pure competition
Monopolistic competition
An oligopoly
The most common way that farmers do forward pricing is through __________ .
Future contracts
Cash contracts
Options contracts
Hedge contracts
Which of the following is NOT a characteristic of an amortized loan?
The total principal and interest payment is constant over the repayment period
More of the total payment is allocated to principal and less to interest over the life of the loan
The same amount of each payment is allocated to principal and interest with each payment
The loan balance will be zero at the end of the repayment period
Accrued interest is __________ .
Interest that has not been paid
Interest on short term or operating loans
Interest owed but not yet paid
Interest owned but not yet paid on noncurrent loans
A cash accounting system does NOT provide a good measure of net farm income because it is easy to __________ .
Delay revenue
Delay expenses
Accelerate expenses
All of the above
Which of the following tasks is NOT included in human resources management?
Hiring employees
Evaluating performance
Determining compensation
Lowering labor costs by lowering cash wages
Job descriptions would NOT be used for which of the following?
Provide a list of primary duties of the position
Tell the employee how to do the job
Help to guide a performance review
Give employees a position title
Limited partners are NOT allowed to participate in which of the following?
Management of the business
Ownership of the business
Deciding to sell the business
Receiving income from the business
Since a farm corporation has an infinite life, __________ .
There is no need for estate planning
Management succession will not be a problem
farm assets will not need to be transferred
Shares of stocks will be transferred before or at the time of the owner's death
Which of the following is a business function?
Planning
Directing
Marketing
Monitoring
The people that own a farm corporation are the __________ .
Board of directors
Managers
Shareholders
Partners
Input or resource substitution is __________ .
A function of calculus
Used to calculate the least cost combination
A linear function
All of the above
When should the principle of Input Substitution be used?
When one input can be used in place of another
When the goal is to minimize the cost
When there is an input price change
All of the above
The Principle of Resource/Input Substitution will always calculate __________ .
The most expensive combination of resources
A combination of answers
The least cost combination of resources
None of the above
One disadvantage of a corporation is that there is the potential for “double taxation.” Which of the following is double taxed in a corporation?
Sales (revenues)
Interest payements
Net income
All of the above
Which of the following must be true for a business to be organized as an S-corporation?
It must have 100 or fewer stockholders
it can only have one class of stock
All stockholders must be individuals or estates of individuals
All of the above
A sound estate plan needs to address which of the following items?
How estate taxes will be paid
The transfer of assets
How income taxes will be paid
All of the above
The repayment of a loan and the interest due with a series of equal payments over a specified period of time is known as __________ .
Contract rate
Debt
Credit
Amortization
Interest that is paid on both the principal and also on any interest from past years is known as __________ .
Compound interest
True rate of interest
Simple interest
Effective rate
The rate that was negotiated between borrower and lender at the beginning of the loan process is known as __________ .
Actuarial rate
Effective rate
Contract rate
Simple rate
The rate of interest that ends up being charged on each payment made is known as __________ .
Actuarial rate
Effective rate
Simple interest
Compound interest
An addition to revenue, net worth or any other account is known as __________ .
Effective rate
Credit
Simple interest
Compound interest
An obligation to pay in the future is known as __________ .
Actuarial rate
Amortization
Debt
Contract rate
Social Security benefits include __________ .
Old age retirement
Disability
Death benefit
All of the above
The earnings of a C-corporation that are later distributed to the owners as a dividend are __________ .
Taxed one time
Taxed two times
Taxed three times
Not taxed at all
Strategies to reduce taxable income are __________ .
Use deferred sales contracts
Purchase a new personal car
Remodel the kitchen
All of the above
Strategies to increase taxable income are __________ .
Postpone expenses
Do some custom work
Sell marketable grain or livestock
All of the above
The cost of machinery, equipment and farm buildings can be deducted each year over their expected life. This is called __________ .
Appreciation
Depreciation
Operating cost
Disposition
Effective tax planning requires consideration of all but one of the following:
Personal financial goals
Up to date records
Purchase of capital items
Reliable long-range projections
The main objective of income tax management is to __________ .
Get the final line on tax form to zero
Get into the lowest tax bracket
Maximize after tax income
Minimize the tax obligation
When a producer uses the futures market, his/her objective is to __________ .
Obtain a loan
Transfer risk
Be in a government program
None of the above
Producers who use the futures market to purchase or sell options will work with __________ .
A broker
A lawyer
An auctioneer
A saleman
The price at which a producer buys or sells an option is the __________ .
Local price
Futures price
Average price
Strike price
Someone who is bullish on market prices thinks that price will __________ .
Go lower
Go higher
Stay steady
None of the above
When the producer is satisfied with the price of his/her soybeans, he/she could __________ .
Buy futures
Cash contract
Sell a put
Sell a call
The price difference between the local price and the futures price of called __________ .
Basis
Ceiling
Floor
Cost
When the futures price moves above the price that the producer sold at, he/she will receive __________ .
A bonus
A margin call
A deferred contract
Nothing
To set a maximum price incurred for soybean meal to be fed to cows, the producer could __________ .
Purchase a call option
Purchase a put option
Sell a call option
Sell a put option
To protect the price to be received for corn or soybeans being sold, the producer could __________ .
Purchase a call option
Purchase a put option
Sell a call option
Sell a put option
The steps of (A) selecting an accurate system suited to your business situation, (B) selecting a method of reporting farm income and expenses, and (C) developing a procedure to get exactly the information needed from records are the steps needed to set up _________ .
A record system
An income statement
A cash flow budget
A balance sheet
What are accounting methods used for?
Keeping records
Tax purposes
Make management decisions
All of the above
The key difference between accrual and the cash method of accounting is __________ .
How income comes in and goes out of a business
When revenue and expense are recognized
The total revenues recorded from a transaction
All of the above
Someone who is neither invited nor desired in your place of business is a(n) __________ .
Customer
Invitee
Trespasser
Licensee
As an employer, your responsibilities to your employees include all of the following except which one?
Provide a safe place to work
Provide competent fellow employees
Avoid making rules about conduct of employees while at work
Warn and instruct employees of danger which they could not reasonably be expected to see
Which of the following items will NOT be included in the estate of a business owner?
Bank deposits
Real estate
Gifts made more than 5 years before date of death
Securities
The selling of a commodity futures contract to protect a producer from price fluctuations at the time the product is sold is known as __________ .
Insurance
Diversification
Hedging
Risk management
A method of prorating the cost of a capital asset over its useful life is __________ .
Appreciation
Depreciation
Deterioration
Deductions
Which of the following is NOT a tax law provision that can be used for agricultural producers?
Special accounting methods
Special capital expenditure deductions
Breeding livestock as capital asset
Loan principal as a deductible expense
Effective tax planning requires all but one of the following:
Personal financial goals
Up to date records
Accurate estimates of family living expenses
Reliable long-range projections
When a producer has a position in the futures market and it moves against him, he/she will get __________ .
A margin call
To sell at a profit
A new position
To make money
It is important when using futures contracts that you close out both the cash and futures position __________ .
Daily
At harvest
Simultaneously
At any time
The main goal of a good marketing plan is to __________ .
Get the highest prices
Reduce risk
Manage production cost
At least get the average price
A producer who wants to protect his/her price with options would purchase a __________ .
Call
Put
Contract
Monitor
When a producer sells with futures contracts, the buyer becomes the __________ .
Marketer
Risk taker
Consumer
Aggressor
The difference between the local cash market and the futures market is called the __________ .
Average
Basis
Contract
Deduction
A person who has strong feelings that the market is headed higher is considered __________ .
To be afraid
A bull
A bear
A cow
Developing an accrual adjusted income statement requires _________ .
Inventory records, cash revenue, cash expenses and depreciation
Depreciation records, cash revenue and cash expenses
Inventory records, cash revenue and depreciation records
Inventory records, cash expenses and depreciation records
Which method of accounting is considered the easiest?
Accrual adjusted accounting
Double entry accounting
Accrual accounting
Single entry accounting
When deciding on the level of record keeping for a business, managers need to consider __________ .
The amount of information desired from the records
The amount of time they can devote to record keeping
Their record keeping abilities
All of the above
What does marginal cost measure?
The output cost from production of one unit of input
The change in cost from one enterprise to another
The change in total cost from adding another unit of input
The change in cost by producing another unit of output
The accounting method used by most farmers for income tax is __________ .
Accrual
Corporate
Cash
Deferred
Good income tax management is to __________ .
Maximize after-tax income
Have zero taxable income
Maximize total income
Minimize the tax obligation
Which of the following items would be a farm business expense for an accounting period?
Cash used to purchase new machinery
Cash used to purchase livestock feed
Cash received for the sale of livestock
Cash used to purchase groceries
Supplies are paid for during an accounting period, but at the end of the accounting period, the supply inventory is larger. This indicates which of the following?
Cash expenses overstate actual expenses for the accounting period
Cash expenses understate actual expenses for the accounting period
Cash expenses are an accurate measure of supply expenses for the accounting period
Cash receipts are an accurate measure of supply expenses for the accounting period
A farm business accounting period for January 1, 2011 to December 3, 2011 would be an example of what type of accounting period?
Calendar year accounting period
Required accounting period
Monthly accounting period
Quarterly accounting period
What does marginal cost measure?
Change in cost from one enterprise to another
Output cost from production at a specified level of inputs
Change in the cost to produce another unit of output
Change in total cost to produce another unit of output
The legal, economic and social act of determining the allocation of a person’s property to appropriate heirs is defined as __________ .
A business plan
An estate plan
A transition statement
A vision statement
The procedure that spreads out the cost of capital assets over their useful life is __________ .
Depreciation
Appreciation
Itemized deductions
Deterioration
Proper income tax management should result in __________ .
Level income from year to year
Zero taxable income
Maximizing income each year
Always deferring income to the next year
Which of the following is NOT an advantage to buying options?
Limited risk
No margin calls
Low commission cost
Unlimited potential
When using options, the futures price you want to fix is __________ .
Option price
Strike price
Buyer's price
Seller's price
The money used to insure performance of a futures contract is called __________ .
Margin
Premium
Basis
Commission
The difference in the futures price and the local price is called __________ .
Net price
Strike price
Basis
Premium
One who believes prices are too low and will advance is known as __________ .
Bull
Bear
Short
Seasonal
One who believes prices are too high and will decline is known as __________ .
Bull
Bear
Short
Seasonal
The right to sell underlying futures at a specific price is known as __________ .
Direct marketing
Supply curve
Put option
Call option
One who sells futures contracts to protect a producer from price fluctuations is known as __________ .
Bear
Hedger
Bull
Short
Which of the following effectively puts a cost ceiling on raw material costs such as feed costs?
Put option
Call option
Supply curve
Derived demand
Which of the following items would NOT be a farm business expense for the accounting period?
Cash used to purchase new machinery
Cash used to purchase livestock feed
Cash used to purchase feeder livestock
Cash used to purchase fertilizer
