2010-2012 State Non-Math M/CFarm Management CDE
On a crop enterprise budget that does not include any charges for land, which number corresponds to the maximum amount that a farmer could pay in cash rent per acre in the short run?
A. Total operating costsB. Returns above total operating costsC. Total costsD. Returns above total costsE. None of the aboveB.
2. On a crop enterprise budget that does not include any charges for land, which number corresponds to the maximum amount that a farmer could pay in cash rent per acre in the long run?
A. Total operating costsB. Returns above total operating costsC. Total costsD. Returns above total costsE. None of the above D
8. The main drawback of an adjustable rate mortgage is that
A. the initial interest rate is usually higher than for other types of loans.B. the interest is not deductible for farm businesses.C. it is only available for loans under $100,000.D. the interest rate can increase.E. None of the aboveD
9. The cost of producing one additional unit of output is called
A. opportunity cost.B. substitution cost.C. average cost.D. marginal cost.E. None of the aboveD
12. USDA has an FSA office in most rural counties. FSA stands for
A. Farm Service Agency.B. Field System Administration.C. Financial Survey Agency.D. Federal Statistical Analysis.E. None of the above.A
15. Collectively, amino acids are usually called
A. starch.B. protein.C. fats.D. plasma.E. None of the aboveB
17. The short-run supply curve for a firm is identical to
A. average variable cost. B. average fixed cost. C. average total cost. D. marginal cost. E. None of the above .D
. 18. A farm business with declining average total costs has
increasing returns to size. decreasing returns to size. constant returns to size. decreasing demand. None of the above A
. 19. Which of the following is not a type bankruptcy?
Chapter 7 Chapter 11 Chapter 12 Chapter 13 All are bankruptcy chapters E
20. The maximum amount that a wife can inherit from her husband without owing any federal estate tax is
$10,000. $600,000. $600,000 less excess gift tax. unlimited. None of the above D
16. A 2-wheel drive tractor typically requires more horsepower to pull the same implement as a 4-wheel drive tractor because
A. 2-wheel drive tractors have more slippage.B. 2-wheel drive tractors weigh more.C. 2-wheel drive tractors are often older.D. 2-wheel drive tractors calculate horsepower differently.E. None of the aboveA
. 27. A grain farmer who normally stores his soybeans at a local elevator has decided to use the options market to create a synthetic storage. To do so he will sell his beans at harvest and A. buy a put option. B. sell a put option. C. buy a call option. D. sell a call option. C.
. 29. The primary goal of income tax management for a farm operator is to
A. minimize income taxes paid. B. maximize the taxable income. C. minimize the taxable income. D. maximize the farm's after tax income. E. None of the above D.
30. The demand curve shows the relationship between
A. consumer tastes and the quantity demanded. B. price and the quantity demanded. C. price and production costs. D. money income and quantity demanded. E. None of the above B.
. 35. The best measure of a firm's ability to make a short-term loan payment is
A. debt/asset ratio. B. solvency ratio. C. current ratio. D. leverage ratio. E. net capital ratio. C.
36. If the U.S. wheat industry has an inelastic demand curve, a decrease in the amount of wheat supplied to the market would A. have no effect on total revenues for wheat producers. B. increase the total revenues for wheat producers. C. decrease the total revenues for wheat producers. D. cause a sharp increase in the demand for wheat. E. None of the above B
. 8. A acre equals 0.40 hectares 0.74 hectares 2.47 hectares 5.05 hectares None of the above A
. 9. A farmer who wants a real rate of return on his investment of 5% will use what discount rate if he anticipates inflation of 2% per year? 2% 3% 5% 7% None of the above D
. 10. An increase in the rate of inflation, everything else equal, will have what impact on the present value of a future stream of income?
No impact Increase the present value Decrease the present value Cannot tell None of the above C
11. The process of finding the present value of a dollar to be received in the future is known as
compounding. discounting. forwarding. ratio analysis. None of the above B
. 12. Fred Brown raises corn and feeds it to his hogs. This type of business structure is an example of
vertical integration. horizontal integration. supply company. marketing cooperative. None of the above A
13. If the price of a commodity is too low, the demand will be greater than the supply resulting in a
surplus. boycott. monopoly. shortage. None of the above D
. 14. A farmer placed too high a value on his land in his closing inventory while all other records were accurate. Net working capital in his record summary is
too high. too low.not affected. fixed. None of the above C
21. Many farmers do a considerable amount of custom work. Their reason for doing this is
to spread the fixed cost of their equipment over more acres. to earn a return to under-utilized labor. to help out their neighbors. to supplement on-farm income. All of the above E
22. Using comparable sales for the purpose of appraising farmland is called the
A. inventory approach to appraising. B. earnings approach to appraising. C. market approach to appraising. D. cost approach to appraising. E. None of the above. C
23. Other things equal, the value of land will be greatest to the farmer who has the longest planning horizon. shortest planning horizon. highest discount rate. lowest discount rate. None of the above D
25. The farm return to land, labor, and capital for a year would be found on
the balance sheet.the cash flow budget. the income statement. D.a partial budget. E. None of the above C
26. Which of the following is considered Schedule F farm income?
Cull breeding stock Crop sales Sales of farm equipment Sale of land All of the abovEB
27. For the rules of depreciation, which of the following is an example of "listed property"? A home A raised cow A greenhouse A passenger car None of the above .D
28. An LLC (Limited Liability Company) is usually
taxed like a corporation. taxed like a partnership. not for profit and therefore not taxed. illegal in Missouri. None of the above .B
. 29. The main difference between cash and accrual accounting is that accrual accounting includes
charge for unpaid family labor. depreciation. an adjustment for changes in inventory. sales of assets. None of the above C
. 30. A farmer should issue an IRS Form 1099 for which of the following?
$750 paid to a neighbor for hay. $500 paid to a neighbor for custom work. $1500 paid to a neighbor for a bull. $650 paid to a neighbor for land rent. All of the above D
. 31. When required, you must send an IRS Form 1099-MISC to IRS before
December 31. January 31. March 1. April 15. 90 days after payment. C
. 32. The IRS form used to calculate self-employment tax is
Schedule D. Form 4797. Form 4562. Schedule SE None of the above D
. 33. The USDA agency that administers the federal crop insurance program is the Farm Service Agency Risk Management Agency Farm Crop Insurance Agency Rural Development Agency None of the above B
. 34. Which is not a policy plan for multi-peril crop insurance?
Revenue Protection Yield Protection Management Protection Revenue Protection with harvest price exclusion None of the above C
35. On a crop insurance policy, APH stands for
Adjusted Protection History Accumulated Price History Approximate Policy Hierarchy Actual Production History None of the above .D
46. The ability of larger firms to be more profitable than smaller firms in the same industry is an example of
diminishing returns. imperfect competition. inelastic supply. economies of size. None of the above D
. 36. What type of insurance protects the farmer from lawsuits if he/she is responsible for personal injury or property damage to another person?
Life insurance Property insurance Accident insurance Liability insurance None of the above D
39. Which of the following should not affect a farmer's decision to store his crop?
Interest rates Shrinkage during storage Anticipated price in the future What he paid for his grain bin None of the above .D
44. A farmer who prefers to produce all his crop under contract would be considered
risk averse. risk neutral. risk loving. risk indifferent. None of the above A
. 45. The returns for a farmer who produces his crop under a contract as compared to a farmer who produces none of his crop under contract would be
more variable. less variable. always higher. always lower. None of the above B
46. For an amortized loan, the amount of interest in the first payment will be
more than the amount of the principal. less than the amount of the principal. equal to the amount of the principal. dependent on the length of the loan. None of the above E
37. Even though corn prices are at record levels, corn farmers still receive from USDA
direct payments. loan deficiency payments. counter-cyclical payments. acreage protection payments. None of the above A
. 47. Crop prices increase, causing Marcia's sales income to increase while leaving her cash operating expenses unchanged. This will cause her capital turnover to increase. decrease. not change. Any of the above None of the above A
37. A trader with a long position in the futures market A. profits when prices go down, loses when prices go up. B. profits when prices neither go up nor down. C. profits when prices go up, loses when prices go down. D. loses when prices neither go up nor down. E. cannot lose money. C
38. Livestock, stored grain, land, and personal property used to secure a loan are
collateral. inventory. liabilities. net worth. Illiquid. A
39. Which of the following is not a supply shifter for farm products?
weather new technology government programs consumer income None of the above
41. Cooperatives pay patronage refunds according to
one man, one vote. size of farm. amount of business done by patron. total assets. All of the above C
. 23. Which is heavier, a bushel of shelled corn or a bushel of soybeans?
A. Shelled corn B. Soybeans C. They weigh the same. D. Depends on whether measured in pounds or kilograms. E. None of the above B
24. If the interest rate is 10%, what is the present value of a dollar to be received by a producer two years from now?
A. $0.826 B. $0.900 C. $1.100 D. $1.210 E. None of the above A.
18. A Subchapter S corporation can have no more than
A. 10 shareholders.B. 35 shareholders.C. 75 shareholders.D. 100 shareholders.E. There is no limit on number of shareholders.D
20. Purchase of a call option on corn means the buyer
A. is required to sell a corn futures contract at a set price.B. may sell, but is not required to sell, a corn futures contract at a set price.C. may buy, but is not required to buy, a corn futures contract at a set price.D. is required to buy a corn futures contract at a set price.E. None of the above C
21. The disadvantage of leasing a tractor as compared to purchasing is that leasing
A. increases your income tax.B. decreases your depreciation and capital expensing.C. releases capital for other uses.D. reduces output per worker.E. costs less in the long run.B
23. The capital gains taxes that would be due should a farmer sell his land is an example of a
A. current liability.B. long-term liability.C. deductible expense.D. contingent liability.E. None of the above D
24. Which USDA agencys primary activity is conducting surveys to determine farm production, prices, income, and expenses?
A. Agricultural Research Service (ARS)B. National Agricultural Statistics Service (NASS)C. Agricultural Marketing Service (AMS)D. Economic Research Service (ERS)E. None of the above B
25. Which of the following statements regarding accrued interest is most nearly true?
A. Beginning accrued interest will always be less than ending accrued interest.B. Beginning accrued interest will always be greater than ending accrued interest.C. Accrued interest pertains only to short-term debt.D. Accrued interest pertains only to intermediate and long-term debt.E. Accrued interest is not a cash expense until it is paid.E
26. Diminishing marginal returns to a factor of production are most likely to occur when
A. one factor is increased and all others are fixed.
B. one factor is fixed and all others are increased in equal proportion.
C. all factors are increased in equal portion.
D. One factor is decreased and all others are fixed.
E. None of the aboveA
34. The Social Security wage base
A. does not apply when calculating Medicare taxes.B. is the same for Medicare as for Social Security.C. is doubled when calculating self-employment income.D. is half as much for self-employed individuals.E. None of the aboveA
35. A written agreement by which an owner of property transfers title to someone for the benefit of beneficiaries is a
A. trust.B. partnership.C. corporation.D. sole proprietorship.E. None of the above A
37. The price of widgets changes from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. From this we can conclude that
A. the demand for widgets is elastic.B. the demand for widgets is inelastic.C. the demand for widgets is of unit elasticity.D. the demand for widgets has declined.E. None of the aboveA
30. The demand curve shows the relationship between
A. consumer tastes and the quantity demanded.B. price and the quantity demanded.C. price and production costs.D. money income and quantity demanded.E. None of the aboveB
17. A farmer is solvent if
A. he has sufficient current assets to cover current debts.B. he has sufficient equity to cover debts.C. he has sufficient assets to cover all debts.D. he can pay all debts with all equity.E. All of the above C
38. In analysis of a farm, what would you do if a cash flow projection indicated that there would be more expense than income in a certain month?
A. Terminate the enterprise causing the cash flow problem that month.B. Use savings, delay expenses, move up sales, or borrow money.C. Change from cash to accrual accounting method.D. Change depreciation methods.E. None of the aboveB
41. Which of the following would not appear on a cash flow statement?
A. Interest paid on a loan for a tractorB. Principal paid on a loan for a tractorC. Depreciation expense on a tractorD. Rental payment received from the neighbor who used the tractor.E. None of the aboveC
45. An increase in total costs of $20 per acre will increase the breakeven yield by how many units if the price the price is $5 per unit.
A. 4 unitsB. 10 unitsC. 20 unitsD. 100 unitsE. None of the above.A
12. The best indication that a farmer is making financial progress year-to-year is A. an increase in the value of total assets on the balance sheet. B. a decrease in the value of total liabilities on the balance sheet. C. an increase in net worth on the balance sheet. D. an increase in total cash flow on the cash flow statement. E. None of the above C.
25. When an increase in production of one enterprise causes a reduction in the production of another enterprise, the two enterprises are said to be
A. independent. B. complementary. C. supplementry. D. competitive. E. None of the above D.
42. Frank's beginning balance sheet showed $40,000 in corn stored at the local elevator. Which of these would not explain his ending balance sheet entry of $20,000 corn stored at the local elevator?
A. He sold some corn during the year.B. The price of corn was lower at the end of the year.C. He had less corn stored at the end of the year than the beginning.D. All of these could explain the decrease.E. None of these would explain the decrease..D
1. For tax year 2009, the social security wage base was A. $94,200 B. $97,500 C. $102,000 D. $106,800 E. None of the above D.
The two primary methods of describing the size and location of farmland are rectangular survey and A. angle and distance. B. differential elevation. C. border calibration. D. metes and bounds. E. None of the above D.
27. A cattle feeder, wishing to use futures markets to hedge the price of slaughter cattle, would at the time of his cattle purchase
A. buy futures contracts expecting to sell the contracts when selling cattle.B. sell futures contracts expecting to sell more contracts when selling cattle.C. sell futures contracts expecting to buy contracts when selling cattle.D. buy futures contracts expecting to buy more contracts when selling cattle.E. All of the aboveC
28. An increase in the value of the U.S. dollar relative to the currency of other countries should result in
A. more costly imports.B. less costly imports.C. increased exports.D. no effect on imports or exports.E. None of the above B
32. A vicious cold spell in the late spring has wiped out the buds on the peach trees grown in Georgia, a major peach producing state. How will this freeze impact the price received for peaches by Maryland peach producers?
A. No effect - Georgia is too far away to have any impact on Maryland.
B. Will lower the price because the demand for peaches will be lower.
C. Because of the reduced supply, prices for peaches in Maryland will tend to move upward.
D. No effect - Maryland does not grow enough peaches to have any impact on prices.
E. None of the aboveC
42. For a trader who is short in the market, a standing order to buy should the futures price move above a certain level is called a
stop order. limit order. permanent block. hedge. None of the above A
. 14. For an amortized loan, the amount of interest in the first payment will be
A. more than the amount of the principal. B. less than the amount of the principal. C. equal to the amount of the principal. D. dependent on the length of the loan. E. None of the above E.
. 16. The maximum amount that can be claimed as a Section 179 expense deduction on your 2009 tax return is A. $5,000. B. $25,000. C. $100,000. D. $250,000. E. None of the above D.
. 22. A farmer's net returns per acre for establishing alfalfa the first year are negative, but he makes money for each of the next four years before the alfalfa has to be reestablished. In preparing an enterprise budget to compare alfalfa with other crops A. he should use only the returns after the alfalfa has been established. B. he should decrease the annual returns after the alfalfa has been established by the cost of establishing the crop. C. he should decrease the annual returns after the alfalfa has been established by 20% of the establishment year losses to cover the cost of establishment. D. he should amortize the establishment year losses over the remaining four years.
E. None of the above D
. 6. How many acres are in a quarter section of land? A. 40 acres B. 160 acres C. 640 acres D. 1,000 acres E. None of the above B
. 8. Which of the following farm items is not eligible to be depreciated? A. A machine shed constructed by the farmer B. A used tractor purchased from a neighbor C. A new pickup D. Raised heifers added to the breeding herd E. None of the above
. 9. Advantages of incorporating the farm business include all of the following except A. limiting personal liability. B. better income tax treatment for fringe benefits. C. simpler record keeping. D. facilitates multiple owners. E. None of the above .C
10. A decrease in the value of the U.S. dollar relative to the currency of other countries should result in
A. more costly imports. B. less costly imports. C. decreased exports. D. no effect on imports or exports. E. None of the above
. 11. Carrie Cattlefeeder buys feeder cattle and corn and sells fed cattle.If she wants to be totally hedged in the futures market for her price risk in the coming year, she would be A. "short" fed cattle, "long" feeder cattle, and "long" corn. B. "short" fed cattle, "short" feeder cattle, and "short" corn. C. "short" fed cattle, "short" feeder cattle, and "long" corn. D. "long" fed cattle, "short" feeder cattle, and "short" corn. E. None of the above A.
. 44. Interest rates go up, causing Jack's annual interest expense to increase from $12,000 to $14,000. This will cause his rate of return on equity to
increase. decrease. not change. Any of the above None of the above B
. 45. Crop prices decline, causing Marcia's sales income to decline while leaving her cash operating expenses unchanged. This will cause her capital turnover to
increase. decrease. not change. Any of the above None of the above B
15. When the size of the soybean harvest exceeds locally available farm and elevator storage, what happens to the basis?
Basis narrows. Basis widens. Basis goes out of existence. Basis is usually the same all year long. None of the above B
. 16. The money you must deposit with a broker to insure performance in order to trade in the futures market is called
basis. B. margin. C. commission. D. spread. E. None of the above B