farm business 2019

a producer must send form ___ to each independent contractor earning over $600

1099

a producer must send each employee a form __ at the end of the year showing earnings and all withholdings

W2

which of the following is a source of farm revenue? place the letter of the correct item(s) in the answer sheet box. a. customer payment of accounts receivable b. interest payments during the accounting period c. sale of grain produced during the accounting period d. cash received from a new noncurrent loan to purchase a new tractor

a and c

the personal exemption in 2018 is a. $0.00 b. $1k c. $2500 d. $5k

a. $0.00

which of the following risks should be avoided? a. a high frequency and high severity risk b. a low frequency and high severity isk c. a low frequency and low severity risk d. a high frequency and low severity risk

a. a high frequency and high severity risk

___ is an example of risk transfer a. an insurance policy b. a fire suppression system c. testing for food-borne pathogens d. b and c

a. an insurance policy

a producer buys 5,000 units of a product for $3.00 per unit in market A. she simultaneously sells all 5,000 units for $4.00 per unit in market B. the producer's ability to profit from price discrepancies in different markets is called a. arbitrage b. marginal value c. margin d. none of the above

a. arbitrage

the statement summarizing the value of business assets and liabilities is often referred to as a balance sheet because a. assets = liabilities + owner equity or net worth b. assets + liabilities = owner equity c. assets + owner equity or net worth = liabilities d. owner equity or net worth = assets + liabilities

a. assets = liabilities / owner equity or net worth

a method of prorating the cost of a capital asset over its useful life is a. depreciation b. amortization c. remaining value d. capitalized value

a. depreciation

which of the following would be considered a fixed cost? a. depreciation on machinery b. hired seasonal labor c. crop production inputs d. feed purchasers

a. depreciation on machinery

when determining the effect of growing more aces of a crop, the cost most likely to change would be a. fixed costs per acre b. operating costs per acre c. rent per acre d. rent per acre d. crop insurance

a. fixed costs per acre

when using cash accounting records, a business will recognize a. income and expense transactions at the time of actual cash transactions b. income and expense transactions regardless of when they are incurred c. income when it is produced d. expenses when the item is used in the production process

a. income and expense transactions at the time of actual cash transactions

which of the following factors will cause a movement along the demand curve? a. own price change b. change in consumer tastes/preferences c. prices of other goods/services d. consumer incomes

a. own price change

if volkstad pecan company decided to join with other pecan growers to start a pecan shelling plant, which type of cooperative should they form? a. processing b. marketing c. credit d. purchasing e. service

a. processing

the yield protection in revenue protection insurance is based on a. the farm's actual production history of yields b. the county's actual production history of yields c. the state's actual production history of yields d. whatever yield coverage the farmer wants to buy

a. the farm's actual production history of yields

the price protection in revenue protection insurance is based upon a. the futures market b. the local cash market c. the U.S. marketing-year average price d. a price determined by the USDA

a. the futures market

to mathematically determine the least cost combination of two inputs you will find where a. the marginal rate of substitution equals the price ratio b. the marginal cost equals the average cost c. the marginal rate of substitution equals total revenue d. the price ratio equals the marginal products e. the price ratio equals the cost ratio

a. the marginal rate of substitution equals the price ratio

a farmer would use the futures market with the objective to a. transfer risk b. increase risk c. participate in government farm programs d. obtain a loan

a. transfer risk

when a farmer trades in a piece of equipment, it is a. treated as a sale b. added to the purchase price of the new item c. left on the depreciation schedule d. considered tax free income

a. treated as a sale

according to the IRS code, owners of an S-Corporation must be US citizens a. true b. false

a. true

cooperatives allow farmers and ranchers to gain market power by combining their resources a. true b. false

a. true

cooperatives are owned and controlled by their member-patrons and the profits earned by the cooperative are returned to the mmebers based on patronage a. true b. false

a. true

trusts are particularly useful form of business organization for estate planning purposes a. true b. false

a. true

if Volkstad pecan company were to add online sales to their operation, this would be an example of ___ integration a. vertical b. horizontal

a. vertical

the standard deduction for a married couple in 2018 is a. $12k b. $24k c. $34k d. $44k

b. $24,000

the reason for making accrual adjustments to a cash income is to allow a. a better match of cash receipts and expenses to the actual cash flows b. a better match of production with the expenses associated with the timing of production c. an easier explanation of the change in net worth d. a better match of revenue and expenses reported to the internal revenue service for income tax purposes

b. a better match of production with the expenses associated with the timing of production

the most common accounting method used by farmers for taxes a. accrual b. cash c. cash with accrual adjustments d. none of the above

b. cash

a producer who suspects that pecan markets will be bearish in the coming year thinks pecan prices will a. increase b. decrease c. exceed a three-year average d. a and c

b. decrease

all other factors held equal, large carryover stocks will tend to have what effect on a commodity's price? a. increase price b. decrease price c. increase storage costs d. b and c

b. decrease price

budgeting is not used to a. estimate the amount of credit needed b. determine the useful life of assets c. allow for experimentation with possible outcome before resources are committed d. all of the above

b. determine the useful life of assets

the taxes that may be due when a person dies a. asset taxes b. estate taxes c. property taxes d. real estate taxes

b. estate taxes

according to IRS rules, C-Corporations may not have more than 100 stockholders a. true b. false

b. false

the principal and interest amounts in each of the payments on this note will always be the same a. true b. false

b. false

which of the following financial statements lists the cash and non-cash receipts and expenses of a business during a specified period of time? a. balance sheet b. income statement c. statement of cash flows d. statement of owner equity

b. income statement

for a livestock budget to be meaningful, what value should be placed on raised crops fed? a. the costs to produce these crops b. local market value c. local market value plus 10% d. reported state average sale price

b. local market value

a farmer uses revenue protection insurance to protect a corn crop. this type of insurance would protect against a. high prices and high yields b. low yields and low prices c. increases in cash rental rates d. failure of a grain buyer to make a payment upon delivery

b. low yields and low prices

the production function decision rule for moving from stage one to stage two a. maximum marginal product b. marginal product - average product c. minimum average product d. marginal product = 0 e. minimum marginal product

b. marginal product = average product

an increase in the U.S. exchange rate causes domestics goods to become a. less expensive for consumers abroad b. more expensive for consumers abroad c. less expensive for U.S. consumers d. more expensive for U.S. consumers

b. more expensive for consumers abroad

marketing margin is calculated as the per unit sale price less the per unit a. labor cost b. production cost c marginal cost

b. production cost

a major advantage of cash accounting when compared to accrual accounting is it a. provides a more accurate calculation of profit b. provides more flexibility in managing taxable income c. provides a more realistic approach to measuring profits because it more closely matches cash flows d. does not require maintaining revenues and expenses

b. provides more flexibility in managing taxable income

when hedging, it is important that farmers close out both the cash and futures position a. prior to selling the crop b. simultaneously when selling the crop c. keep the futures position open to protect against price risk d. at any time

b. simultaneously when selling the crop

diminishing returns begin to develop in a. stage one of the production function b. stage two of the production function c. stage three of the production function d. stage four of the production function e. none of the above

b. stage two of the production function

contributed (or paid in) capital, plus retained earnings, plus valuation equity is equal to a. total assets plus total liabilities b. total assets minus total liabilities c. net farm income from operations minus cash withdrawals from the business d. total assets plus total liabilities minus equity

b. total assets minus total liabilities

if the statement of cash flow indicates an increase in the cash balance, this means a. total farm revenues were larger than total farm expenses b. total cash received was larger than total cash used c. there was an additional cash contribution made to the business d. net farm income was positive

b. total cash received was larger than total cash used

when the cash price falls relative to the futures price, this is known as a. strengthening basis b. weakening basis c. under basis d. basis risk

b. weakening basis

after the farmer is hedged in question 12, what is the only factor that could change the price received? a. an increase in the futures price b. a decrease in the futures price c. a change in the basis d. a larger than expected yield

c. a change in the basis

the original cost basis of a capital asset, plus improvements, less accumulated depreciation is referred to as the a. net cost value of the asset b. net market value of the asset c. adjusted basis of the asset d. total amortization value of the asset

c. adjusted basis of the asset

the difference between the cash price and the futures price is called the a. strike price b. premium c. basis d. spread

c. basis

pecan markets pose an interesting problem for farm price risk management. there is not a futures contract for pecans. the absence of a futures contract, what is the most appropriate means to manage price risk for pecan operations? a. a forward contract b. a production contract c. both a and b d. neither a nor b

c. both a and b

to hedge using commodity futures, a farmer must a. use a broker b. create a margin account c. both a and b d. do nothing. a farmer can hedge over the internet without a broker or margin account

c. both a and b

a farmer who wants to establish a price floor for corn to be received at harvest would a. buy a call option b. buy a futures contract c. buy a put option d. sell a put option

c. buy a put option

produce is shipped free on board (FOB) shipping point from south america to the u.s. Upon arrival in the U.S. the buyer pays the full price for the shipment but determines there is a deterioration in produce quality. who is liable for the damaged produce?

c. buyer

which of the following is not included in the calculation of accrual adjusted gross farm income? a. crop sales b. crop inventory change c. change in prepaid supplies (expense adjustments - in the key) d. livestock sales

c. change in prepaid supplies (expense adjustment - in the key)

when an increase in the level of production of one enterprise causes a reduction in the level of production of another enterprise, these two enterprises are said to be a. independent b. complimentary c. competitive d. supplementary

c. competitive

a cash flow projection is a form of budgeting that is used to a. determine living expenses b. determine year-end asset values c. determine operating credit needs d. calculate total farm equity

c. determine operating credit needs

a solvency ratio is a measure of ___ risk a. market b. legal c. financial d. human e. production

c. financial

how is the net farm income reported on the 2018 income statement calculated? a. gross cash income - total cash expense b. gross cash income - total cash expense + total inventory change + depreciation c. gross cash income - total cash expense +_ total inventory change +_ depreciation d. gross cash income - total cash expense - depreciation

c. gross cash income - total cash expense +_ total inventory change +_ depreciation

farmers that do not pay income tax quarterly or file an estimate must file and pay by a. jan 30 b. feb 15 c. mar 1 d. mar 15

c. mar. 1

the main thing to keep in mind with regard to income tax management is to a. minimize the tax obligation b. have zero taxes due c. maximize after tax income d. defer income taxes to the future

c. maximize after tax income

which person below is required to pay social security taxes? a. spouse who works with the other spouse b. parent who works for his child who receives payment in-kind c. parent who works for his child's corporation d. child under 19 who works for his parent

c. parent who works for his child's operation

which of the following considerations would factor into storing pecans but not cotton? a. price b. quality c. perishability d. location

c. perishability

for an amortized loan, which of the following increases each year? a. total payment b. interest payment c. principal payment d. none of the above

c. principal payment

a producer using the futures market to hedge the price of a commodity sold in the fall would take what action in may? a. buy futures contracts expecting to buy more contracts when the commodity is sold b. buy futures contracts expecting to sell those contracts when the commodity is sold c. sell futures contracts expecting to buy them back when the commodity is sold d. sell futures contracts expecting to sell more contracts when the commodity is sold

c. sell futures contracts expecting to buy them back when the commodity is sold

a farmer decides to use the futures market to hedge the price of soybeans to be sold at harvest. what should the farmer do to hedge the soybeans? a. buy futures contracts expecting to buy more contracts when the soybeans are sold b. buy futures contracts expecting to sell those contracts when the soybeans are sold c. sell futures contracts expecting to buy them back when the soybeans are sold d. sell futures contracts expecting to sell more contracts when the soybeans are sold

c. sell futures contracts expecting to buy them back when the soybeans are sold

the most commonly used type of business organization for US farms and ranches is the __ a. corporation b. partnership c. sole proprietorship d. limited liability company e. cooperative

c. sole proprietorship

which of the following financial statements explains the change in cash balance for an accounting period? a. balance sheet b. income statement c. statement of cash flows d. statement of owner equity

c. statement of cash flows

which of the following statements is not a best practice when selecting a business organization structure? a. business owners should select the simplest business organization that still meets their needs and goals b. partnership agreements should always be signed, written agreements that are reviewed with the help of an attorney or other competent professional c. the business structure that minimizes taxation the most is always the best choice for business owners d. future plans and aspirations of the business owner should be taken into account when deciding the optimal business structure

c. the business structure that minimizes taxation the most is always the best choice for business owners

when a new or used capital item is purchased and no section 179 is taken, then a. there is nothing to do b. the boot price is put on the depreciation schedule c. the entire amount is placed on the depreciation schedule d. it depends on the item

c. the entire amount is placed on the depreciation schedule

the purpose of the balance sheet is to show at a point in time a. the change in owner equity b. the change in cash balances c. the value of assets, liabilities, and owner equity d. if the business made a profit

c. the value of assets, liabilities and owner equity

net farm income will influence all of the following except a. the change in retained earnings b. owner equity c. total cash expenses d. the rate of return on assets

c. total cash expenses

maximum profit will be obtained when variable input is added until a. total production is maximized b. value of marginal product equals cost ratio c. value of marginal product equals input price d. marginal revenue equals output price e. total revenue is minimized

c. value of marginal product equals input prices

place the letter in the box of all the items that would increase a farm's taxable income

d, f, and h

if the volkstad family has a fixed cost of $100 per acre whe pecan output yields 1,400 pounds per acre, what is the fixed cost per acre when pecan output falls to 1050 pounds per acre? a. $75 per acre b. $125 per acre c. $0 per acre d. $100 per acre e. there is not enough information to determine fixed cost

d. $100 per acre

assume that the following debt-to-asset ratios are given for 5 farms. based solely upon these ratios, which farm is at the greatest financial risk? a. 0.2 b. 0.7 c. 0.6 d. 0.9 e. 0.5

d. 0.9

if you are considering a change in the farm business that affects only a few items. in the total farm budget, this change could most appropriately be evaluated using a. an enterprise budget b. a cash flow budget c. a total farm budget d. a partial budget

d. a partial budget

an enterprise budget is a. a physical and financial plan for the entire farm business for a specified period of time b. a record of past production performance, usually for one production cycle c. the tool used in analyzing only changes in the farm operation and the potential change in net income d. a statement of projected costs and returns associated with one production process, usually for one production cycle

d. a statement of projected costs and returns associated with one production process, usually for one production cycle

during their farming career, bryan and brianna have grown their operation form nothing to a thriving 210 acre pecan orchard. in the long-term, they are interested in protecting their orchard and ensuring that it stays in their family for many generations to come. which of the following business organizations would best suit their goal? a. a partnership b. a sole proprietorship c. a cooperative d. a trust

d. a trust

budgets are used in planning to evaluate the impact of future actions. to improve the accuracy of a budget, the operator may use a. historical data b. forward contracting pricing c. more than one source for estimated data d. all of the above

d. all of the above

effective tax planning requires a. knowing personal financial goals b. up-to-date records c. reliable long-range projections d. all the above

d. all of the above

federal marketing orders are intended to promote agricultural products by collectively influencing a. product demand b. product supply c. product price d. all of the above

d. all of the above

a whole arm schedule of expected returns and expenses is a a. balance sheet b. partial budget c. depreciation schedule d. budget

d. budget

assets, other than land and some livestock, used in farming that have a useful life of more than one year are a. ordinary expenses b. not deductible for taxes c. considered lease expense d. depreciable

d. depreciable

which of the following best describes risk avoidance? a. paying another party to assume a portion of a risk b. a methodology to reduce the severity of a risk c. a methodology to reduce the frequency of a risk d. ending an activity to eliminate the possibility of a loss e. setting aside funds to pay for any losses that may occur

d. ending an activity to eliminate the possibility of a loss

a hedge-to-arrive (futures) contract has three components, two of which are known at the time the contract is purchased. the known components include ___ and ___. the third component, ___, is unknown until a later date. a. delivery month, futures price, premium b. futures price, basis, and delivery month c. margin, basis, delivery month d. futures price, delivery month, basis

d. futures price, delivery month, basis

a worker's compensation insurance policy is an appropriate treatment for a farm's ___ risk a. market b. legal c. financial d. human e. production

d. human

what is lender repossession? a. recovering an asset and refunding principal paid b. paying off debt with a varying repayment schedule c. paying off debt with a fixed repayment schedule d. losing the asset for non-payment

d. losing the asset for non-payment

which of the following financial statements explains the change in net worth for an accounting period? a. balance sheet b. income statement c. statement of cash flows d. statement of owner equity

d. statement of owner equity

an amortization table and loan documents are what a lender provides the borrowers with each loan to disclose the a. amount of money borrowed b. amount of principal and interest paid with each payment c. amount and rate paid to the lender for borrowing the money e. all of the above

e. all of the above

the chart of accounts normally includes a. income and expense accounts b. accounts for current assets and liabilities c. depreciable business asset accounts d. other accounts necessary to create reports needed for good management e. all of the above

e. all of the above

which of the following is likely found in a revenue ledger tracking sources of cash revenue a. date of sale b. buyer c. quantity sold d. unit price and total revenue received e. all of the above

e. all of the above

which of the following is not one of the steps in the risk management process? a. identify b. monitor c. plan d. prioritize e. all of the above

e. all of the above

the production function is the a. economic relationship between firms and consumers b. production relationship between consumers and producers c. economic relationship between costs and prices d. cost relationship betwen consumers and producers e. physical relationship between inputs and outputs

e. physical relationship between inputs and outputs

adopting an appropriate integrated pest management system mitigates ___ risk a. market b. legal c. financial d. human e. production

e. production

an annual payment consists of __. two points

interest and principal