Common Knowledge Farm Business Management CDE-2019 test

A producer must send form ______ to each independent contractor earning over $600

1099

An acre is equal to __________ square feet

43,560

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

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

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. abitrage B. marginal value C. margin D. none of the above

A

A tariff assessed on import is similar to a duty or a tax A. true B. false

A

A tier refers to the townships running east and west in six-mile increments A. true B. false

A

According to the IRS code. owners of an s-corporation must be US citizens A. true B. false

A

Choosing to organize a business as a(n)_______ provides entrepreneurs with the greatest access to capital A. corporation B. partnership C. sole proprietorship D. limited liability company E cooperative

A

Cooperatives allow farmers and ranchers to gain market power by combining their resources A. true B. false

A

Cooperatives are owned and controlled by their member-patrons and the profits earned by the cooperative are returned to the members based on patronage A. true B. false

A

For the Volkstad Pecan Company, the cost of fertilizer can best be described as a(n) A. variable cost B. fixed cost C. total cost D. marginal cost E. average cost

A

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

If Volkstad Pecan Company were to add online sales to their operation, this would be an example of ______ integration A. vertical B. horizontal

A

If the Volkstads expand into feeder cattle and wish to hedge against future corn price increases, which of these actions would accomplish that goal? A. sell a corn futures contract B. buy a corn futures contract C. buy a corn put option D. sell a corn call option

A

Property in most towns and cities on the East coast generally use the metes and bounds survey system A. true B. false

A

The cost of using a resource based on what it could have earned in the nexr best alternative is A. an oppurtunity cost B. always a variable cost C. alwasy a fixed cost D. an alternative cost

A

The curvature of the earth causes a need to include correctional sections in legal descriptions A. true B. false

A

The following excerpt is from a legal description: "W 1/2. E 1/2, SE 1/4, section 10". What system of legal land descriptions does this description confrom to? A. rectangular survey B. recorded plat C. metes and bounds D. none of the above

A

The personal exemption in 2018 is A. $0.00 B. $1,000.00 C. $2,500.00 D. $5,000.00

A

The price protection in revenue protection is based upon A. the futures market B. the local cash market C. the U.S. marketing-yeaer average price D. a price determined by the USDA

A

The range refers to columns of townships running north and south (quadrangle). A. true B. false

A

The statement summarizing the value of business assests 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. Assests + Owner Equity or Net Worth = Liabilities D. Owner Equity or Net Worth = Assests + Liabilities

A

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

To mathematically determine the least cost combination of two inputs, you will find where A. the marginal rate of substitution equal 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 product E. the price ratio equal the cost ratio

A

Trusts are a particularly useful form of business organization for estate planning purposes A. true B. false

A

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

When determining the effect of growing more acres 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. crop insurance

A

Which fo the following risks should be avoided A. a high frequency and high severity risk B. a low frequency and high severity risk C. a low frequency and low severity risk D. a high frequency and low severity risk

A

Which of the following factors will cause a movement along the demand curve? A. own price change B. change in cunsumer tastes/preferences C. prices of other goods/services D. consumer incomes

A

Which of the following is an example of legal risk? A. a change in tariff rates and food export regulations B. a change in consumers' tastes and preferences C. a change in interest reates D. A and C E. A, B and C

A

Which of the following would be considered a fixed cost A. depreciation on machinery B. hired seasonal labor C. crop production inputs D. feed purchases

A

____________ is an example of risk tranfer A. an insurance policy B. a fire suppression system C. testing for food-borne pathogens D. B and C

A

how many years would be required to depreciate the listed properties? Used tractor A. 7 years B. 5 years C. 15 years D. 10 years

A

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

In an accural adjusted income statement, accural adjustments are made for which of the following? A. changes to the value of 2017 and 2018 pecan inventory B. changes to the value of 2017 and 2018 prepaid supplies on hand C. changes in the amount of 2017 and 2018 cash pecan sales D. changes in the amount of 2017 and 2018 cash

A, B

In the event of a suspected food contamination event, which of the following agencies will respond to the situation? A. Centers for Disease Control and Prevention (cdc) B. State and county health departments C. Federal agencies including Food and Drug Administration (fda) D. Environmental Protection Agency (epa)

A, B, C

To analzze the health of the farm busines, you should use which of the following? A. income statement B. cash flow projection C. depreciation schedule D. net worth statement

A, B, D

which of the following is a soure of farm revenue? A. customer payment of accounts recievable B. interest payments during the accounting period C. sale of grain produced during the accounting period D. cash recieved from a new noncurrent loan to purchase a new tractor

A,C

A farmer uses revenue protection insurance to protect 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

A major advantage of cash accounting when compared to accural 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

A producer who suspects that pecan markets will be bearish in the coming year thinks pecan prices will A. increase B. decrease C. exceeds a three-year average D. A and C

B

According to the IRS code, c-corporations may not have more than 100 stockholders A. true B. false

B

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

An increase in the U.S. exchange rate causes domestic 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

An owner of a corporation if also called a(n) ________. A. director B. stockholder C. officer D. member E. trustor

B

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 outcomes before resources are committed D. all of the above

B

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

Diminishing returns begin to develop in A. stage one of the production function B. stage two of the produciton function C. stage three of the production funciton D. stage four of the production function E. none of the above

B

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

Generally, parcels of land that are located in a city subdivision are legally described by using A. metes and bounds B. recorded plats C. rectangular survey D. none of the above

B

How many pounds are in a beef feeder cattle futures contract? A. 30,000 B. 50,000 C. 40,000 D. 10,000

B

If the statement of Cash Flow indicates an increase in the cash balance, this means A. total farm revenues were larger that total farm expenses B. total cash recieved was larger that total cash used C. there was an additional cash contribution made to the business D. net farm income was positive

B

Marketing margin is calculated as the per unit sale price less the per unit A. labor cost B. production cost C. marginal cost

B

Some properties in the U.S. do not have a form of legal land description A. true B. false

B

The most common accounting method used by farmers for taxes A. accural B. cash C. cash with accural adjustments D. none of the above

B

The principal and interest amounts in each of the payments on this note will always be the same A. true B. false

B

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

The reason for marketing accural adjustments to a cash income is to allow A. a better match of cash receippts 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

The standard deduction for a married couple in 2018 is A. $12,000 B. $24,000 C. $34,000 D. $44,000

B

The taxes that may be due when a person dies A. asset taxes B. estate taxes C. property taxes D. real estate taxes

B

USDA certified organic produce must be grown on soil free of prohibited substances for ___ years A. 2 B. 3 C. 4 D. 5

B

USDA uses a milk pricing formula for each of the 4 categories based on end use Which product category is associated with the Class I milk price A. Butter and dry products B. fluid/beverage milk C. soft/maufactured dairy products D. hard cheeses

B

What is the total cash outlay on this note? A. the actual amount of moeny borrowed less interest B. the total amount of money paid to the lender C. the present value of the annuity D. the amount of money left over

B

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. complimentary B. competitive C. supplementary D. independent

B

When hedging, it is important that farmers close out both the cash and futures position A. prior to selling the crop B. simutaneously when selling the crop C. keep the futures position open to protect against price risk D. at any time

B

When the cash price falls relative to the futures price, this is known as A. strengthending basis B. weakening basis C. under basis D. basis risk

B

how many years would be required to depreciate the listed properties? New Pecan harvester A. 7 years B. 5 years C. 15 years D. 10 years

B

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 flow D. statement of owner equity

B

"Starting at an iron post, 523* N 10*" is an excerpt from a legal land description. What system of legal land descriptions does this description conform to? A. rectangular survey B. recorded plat C. metes and bounds D. none of the above

C

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

A complete set of financial statements will allow Bryan to calculate each of the following financial measures except A. profitability measures B. efficiency measures C. per bushel breakeven measures D. repayment capacity measures

C

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 they 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

A farmer who wants to establish a price floor for corn to be recieved at harvest would A. buy a call option B. buy a futures contract C. buy a put option D. sell a put option

C

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 contacts expecting to buy them back 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

A solvency ratio is a measure of ____________ risk A. market B. legal C. financial D. human E. production

C

After the farmer sells futures contracts expecting to buy them back when the soybeans are sold, what is the only factor that could change the price recieved A. an increase in the future prices B. a decrease in the futures price C. a change in the basis D. A larger that expected yield

C

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

For an amortized loan, which of the following increases each year? A. total payement B. interest payment C. principal payment D. none of the above

C

How is the net farm income reported on the 2018 income statement calculated? A. Gross Cash-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

If a farm business owener wishes to organize her business as simply as possible with minimal record keeping requirements, which type of organization should she coose? A. c-corporation B. limited partnership C. sole proprietorship D. limited liability company E cooperative

C

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 ratio D. marginal revenue equals output price E. total revenue is minimized

C

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

Pecan markets pose an interesting problem for farm price risk management. There is not a futures contract for pecans. In the absence of a futures contract, what is the most appropiate 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

Produce is shipped Free On Board (FOB) Shipping Point from South America to the U.S. Upon arroval in the U.S., the buyer pays the full rice for the shipment but determines there is a deterioration in produce quality. Who is liable for the damaged produce A. Shipping company B. Seller C. Buyer

C

The difference between the cash price and the futures price is called the A. strike price B. premium C. basis D. spread

C

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

The most commonly used type of business organization for the US farms and ranches is the most __________ A. corporation B. partnership C. sole proprietorship D. limited liability company E. cooperative

C

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 amortication value of the asset

C

The purpose of a school section was to plan ahead for land settlements so that A. children wouldn't have to travel far to school B. the sections would become the property of the state C. both A and B D. Neither A or B

C

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 vales of assets, liabilities, and owner equity D. If the business made a profit

C

The term output divided by input is known as A. total product B. marginal product C. average product D. marginal cost E. marginal revenue

C

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

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 depreciatio schedule D. it depends on the item

C

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

Which of the following considerations would factor into storing pecans but not cotton? A. price B. quality C. perishability D. location

C

Which of the following financial statement 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

Which of the following is not included in the calculation of accural adjusted gross farm income? A. crop sales B. crop inventory change C. change in prepaid supplies D. livestock sales

C

Which of the following statements is not a best practive 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

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 recieves payment in-kind C. parent who works for his child's corporation D. child under 18 who works for his parent

C

how many sections are in a township? A. 12 B. 24 C. 36 D. 48

C

how many years would be required to depreciate the listed properties? Water well A. 7 years B. 5 years C. 15 years D. 10 years

C

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 unkown 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

A whole farm schedule of expected returns and expenses is a A. balance sheet B. partial budget C. depreciation schedule D. budget

D

A worker's comensation insurance policy is an appropiate treatment for a farm's ____________ risk A. market B. legal C. financial D. human E. production

D

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 statementof projected costs and returns associated with one production process, usually for one production cycle

D

An owner of a limited liability company is also called a(n) _________. A. director B. stockholder C. officer D. member E. trust

D

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

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 contract pricing C. more than on source for estimated data D. all of the above

D

Effective tax planning requires A. knowing personal financial goals B. up-to-date records C. reliable long-range projections D. all of the above

D

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

If the Volkstad family has a fixed cost of $100 per acre when pecan output yields 1,400 pounds per acre, what is the fixed cost per acre when pecan output falls to 1,050 punds 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

If you are considering a change in the farm business that affects only a few times in the total farm budget, this change could most appropiately be evaluated using A. an enterprise budget B. a cash flow budget C. a total farm budget D. a partial budget

D

Of the types of business organizations listed below, which would provide the least protection from legal liability to the owners? A. limited liability company B. S-corporation C. C-corporation D. general partnership

D

Organic pecans are attractive becuase they command a higher sale price than non-organic pecans. Under the current conditions, which of the following factors would the Volkstads need to consider before planting an organic pecan orchard? A. labor requirements B. equipment needs C. pest control costs D. all of the above

D

Thomas Jefferson authorized a system of land measurements to define locations of properties in the western territory for which of these main reasons? A. so that private ownership of property could be easily defined B. so that property could be exchanged to another owner more easily C. a checkerboard system was employed to create more reliable delineations D. all of the above

D

USDA uses a milk pricing formula for each of the 4 categories based on end use Which product category is associated with the Class III milk price A. Butter and dry products B. fluid/beverage milk C. soft/maufactured dairy products D. hard cheeses

D

WHen interpreting a legal land description, you A. read it backwards B. locate the section in the township C. find the location in the quarter D. all of the above

D

Which of the following financial statements explains the change in net worth for an accoutning period? A. balance sheet B. income statement C. statement of cash flows D. statement of owner equity

D

Which of the following is a benefit of a corporate business structure? A. corporate income can be taxed at a lower rate than personal income B. ownership is easily divided into shares C. a corporationg does not dissolve with the death of an owner D. all of the above

D

Which of the follwing is an example fo legal risk? A. paying another party to assumer 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 Esetting aside funds to pay for any losses that may occur

D

how many years would be required to depreciate the listed properties? Refrigerated storage (single use) A. 7 years B. 5 years C. 15 years D. 10 years

D

select all items that would incerease a farm's taxable income A. prepay seed for next year B. defer crop sales to next year C. purchase and pay for diesel fuel D. sell two semi loads of soybeans E. use section 179 on capital purchases F. use straight line depreciation versus MACRS depreciation G pay interest on loans even if it is not due H. delay paying open accounts I. pay operating loan principal

D, F, H

Adopting an appropiate integrated pest management system mitigates _____________ risk A. market B. legal C. financial D. human E. production

E

An amortization table and loan documents are what a lender provides the borrower 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 D. unpaid balance due at the end of each year E. all of the above

E

Products labeled "organic" must meet specific USDA requirements regarding which practices A. Production B. Handling C. Labeling D. A and B E. A, B and C

E

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 between consumers and producers E. physical relationship between inputs and output

E

What are the four factors of production? A. land B. labor C. capital D. management E. all of the above

E

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 recieved E. all of the above

E

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

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 the above

E

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

W2

An annual payment consists of _____________

interest and principal