2003 Missouri FFA
Farm Management Contest
2003 MISSOURI FFA FARM MANAGEMENT CONTEST
Multiple Choice Section
The Farm Management Contest is designed to test student understanding of the
application of economic principles in farm management. Each question is worth
three (3) points. There is only one correct answer for each question. Choose
the best answer and mark the appropriate box on the score sheet provided.
1. The turnover ratio is calculated by dividing __________ by average total
assets.
A. total sales
B. beginning inventory
C. value of farm production
D. net farm income
E. None of the above
2. A farmer purchases 600-pound feeder steers for 90 cents per pound and
plans to sell the steers at 750 pounds. The farmer estimates the total cost of
gain to be 40 cents per pound. The nearest breakeven price when the steers are
sold at 750 pounds is
A. 73.75 cents/pound
B. 80.00 cents/pound
C. 81.25 cents/pound
D. 85.33 cents/pound
E. None of the above
3. How many total acres are included in the "S 1/2 of the NE 1/4 of the SE
1/4 and the N 1/2 of the SE 1/4 of the SE 1/4 of Section 15, Twp. 10N, R4W of
the 5th Principle Meridian"?
A. 40 acres
B. 80 acres
C. 120 acres
D. 160 acres
E. None of the above
4. How much perimeter fence would be required to completely enclose the
parcel of land described in the question above?
A. 1.0 mile
B. 1.5 miles
C. 2.0 miles
D. 2.5 miles
E. None of the above
5. A producer is thinking about storing his corn in the local elevator for
5 months. The price at harvest is $2.20 per bushel and the elevator charges 2
cents per bushel per month for storage plus a 4 cent per bushel handling charge.
He has 5,000 bushels to sell and would need to borrow $20,000 at 8% annual
interest while he stores the corn. What price must he receive for his corn to
break even and cover his storage and opportunity costs?
A. $2.34
B. $2.38
C. $2.41
D. $2.47
E. None of the above
6. How many pounds of 48% protein soybean meal must be mixed with 10%
protein wheat to make a ton of 17% protein feed?
A. 211 pounds
B. 368 pounds
C. 439 pounds
D. 1,632 pounds
E. None of the above
7. A farmer began the year with an outstanding balance of $50,000 on his
operating loan and accrued interest of $3,000 on the loan. The loan carries an
interest rate of 8% on outstanding principal. Six months later he makes a
$4,000 payment on the loan. After this payment he will have an accrued interest
of
A. $0.
B. $500.
C. $1,000.
D. $2,000.
E. None of the above
8. A feedlot operator purchases a pen of 117 feeder steers with an average
weight of 780 pounds and sells them at an average weight of 1081 pounds. Total
feed cost for the pen is $15,500. Feed cost per pound of gain is equal to
A. $0.440
B. $0.515
C. $0.649
D. $0.720
E. None of the above
9. A producer sells 12 feeder steers for $84/cwt. The average weight per
steer is 752 pounds. There is a 2% sales commission and yardage fees of $2.10
per head. The net amount received for the pen of steers would be
A. $6,027.60
B. $6,028.36
C. $7,049.62
D. $7,403.36
E. None of the above
10. If the interest rate is 8%, what is the present value of a dollar to be
received by a producer two years from now?
A. $0.826
B. $0.857
C. $0.920
D. $1.166
E. None of the above
11. On March 1, 2002, Anna borrowed $3,000 to buy bedding plants. On
October 1, 2002, she repaid the $3,000 along with $122.50 interest. What annual
interest rate did she pay?
A. 6.0%
B. 6.5%
C. 7.0%
D. 7.5%
E. None of the above
12. In 2002, Paul Pigraiser had a net farm income of $30,000. Paul had
total business assets of $500,000 and total liabilities of $250,000. Paul paid
$25,000 in interest. Return on equity for 2002 would be
A. 10%
B. 12%
C. 16%
D. 22%
E. None of the above
13. You must use the mid-quarter convention of depreciation if more than
_____ percent of 3, 5, 7, 10, 15, and 20 year property is acquired in the fourth
quarter.
A. 33%
B. 40%
C. 50%
D. 65%
E. None of the above
14. All depreciable property purchased the same year that is within the same
property class must be depreciated using the same method. This applies to all
classes of depreciable property EXCEPT
A. 3 year property.
B. 10 year property.
C. 15 and 20 year property.
D. 27 1/2 and 39 year property.
E. None of the above
15. For an individual under age 50, the maximum allowable IRA contribution
and deduction in 2002 was
A. $1,000
B. $2,000
C. $3,000
D. $4,000
E. None of the above
16. A farmer is "liquid" if
A. he has sufficient current assets to cover current debts.
B. he has sufficient equity to cover current debts.
C. he has sufficient assets to cover all debts.
D. he can pay all debts with all equity.
E. None of the above
17. For tax year 2002, the social security wage base was
A. $76,200
B. $80,400
C. $84,900
D. $89,200
E. None of the above
18. The net business profit for a year would be found on
A. the balance sheet.
B. the cash flow budget.
C. the income statement.
D. a partial budget.
E. None of the above
19. If the price of a commodity increases by 5% and the quantity purchased
decreases by 10%, then the demand for this commodity is
A. upward sloping.
B. inelastic.
C. elastic.
D. unitary.
E. unstable.
20. The type of life insurance which provides protection for a limited time
and is usually cheaper per dollar of protection is called
A. whole life.
B. term.
C. endowment.
D. new life.
E. universal life.
21. Most farmers are self-employed. In developing a cash flow projection,
the farmer's own labor should
A. be included in the income section.
B. be included in the expense section.
C. be subtracted from gross farm income.
D. not be included in the cash flow projection.
E. None of the above
22. A trader with a short position in the futures market
A. profits when prices go down; loses when prices go up.
B. profits when prices go neither up nor down.
C. profits when prices go up; loses when prices go down.
D. cannot lose money.
E. None of the above
23. The main difference between a joint tenancy and tenancy in common is
A. the surviving joint tenant will eventually own all of the land
as a result of right of survivorship.
B. the surviving tenant in common will eventually own all the land
as a result of right of survivorship.
C. only husbands and wives may be joint tenants.
D. tenants in common must own equal shares of the property while
joint tenants may own unequal shares (i.e., H owns 1/4 and W owns 3/4).
E. None of the above
24. Increasing leverage during a period when a farm's percent return to
total capital is less than the interest rate will mean
A. higher returns to equity.
B. lower returns to equity.
C. lower risk.
D. lower gross income.
E. None of the above
25. A marketing function which tends to regulate the supply of a product and
provide a stable market price is
A. transporting.
B. processing.
C. grading.
D. storing.
E. None of the above
26. Which one of the following would cause an increase in the price of an
agricultural commodity?
A. An increase in supply and a decrease in demand
B. A decrease in supply with no change in demand
C. A decrease in demand with no change in supply
D. All of the above would cause price to increase
E. None of the above
27. A firm should shut down in the short run if it cannot cover its
A. fixed costs.
B. total costs.
C. variable costs.
D. time costs.
E. overhead costs.
28. Changes in price within a year which tend to follow the same pattern
over time are called
A. price cycle.
B. price seasonality.
C. price volatility.
D. price discrimination.
E. None of the above
29. If the price of a commodity is too high, the supply will be greater than
the demand resulting in a
A. surplus.
B. boycott.
C. monopoly.
D. shortage.
E. None of the above
30. A farmer who buys feeder pigs could use the options market to reduce his
price risk by
A. buying a hog Put option.
B. selling a hog Put option.
C. buying a hog Call option.
D. selling a hog Call option.
E. All of the above
31. Corn has an expected yield of 125 bushels per acre and a production cost
of $180.00 per acre. Expected market prices are $2.40 per bushel for corn and
$6.00 per bushel for soybeans. Soybeans can be raised at a production cost of
$100 per acre. At what breakeven yield per acre would soybeans generate the
same net return per acre as corn?
A. 36.7 bushels
B. 37.3 bushels
C. 40.2 bushels
D. 48.1 bushels
E. None of the above
32. If high oil corn has the same production cost per acre as regular
corn but can be sold for 15 cents per bushel more, what yield of high oil corn
is needed to equal 125 bushels of regular corn at $2.40 per bushel?
A. 109.1 bushels
B. 113.2 bushels
C. 117.6 bushels
D. 120.7 bushels
E. None of the above
33. A township is six miles square and includes
A. 6 sections.
B. 36 sections.
C. 40 sections.
D. 160 sections.
E. None of the above
34. If a farmer purchased land for $160,000, has a loan of $100,000
remaining on the land, and the market value of the land is $200,000, the book
value of the land on the balance sheet will be
A. $40,000.
B. $60,000.
C. $100,000.
D. $160,000 less any accumulated depreciation.
E. None of the above
35. The present value formula for estimating land prices (PV = annual net
returns ÷ discount rate) assumes
A. future prices and yields can be estimated accurately.
B. the discount rate is appropriate.
C. income will continue to infinity.
D. net income will not trend up or down.
E. All of the above
36. A farmer is purchasing a new baler at a cost of $26,000. His dealer
will finance the baler under the following terms: 20% down payment with the
balance repaid in equal payments over the next 6 years at 7% APR. The farmer
expects the baler to last for 8 years and have a salvage value of $6,000. How
much interest will the farmer pay the first year of the loan?
A. $1,120
B. $1,400
C. $1,456
D. $1,820
E. None of the above
37. A constant payment loan with payments consisting of principal and
interest is called
A. an amortized loan.
B. a complementary loan.
C. a discounted loan.
D. a fixed rate loan.
E. a capital loan.
38. The "rule of 72" says to divide 72 by the annual interest rate to
estimate the number of years needed for an initial investment earning that rate
to double. How long would it take for $5 earning 6% a year to grow to $20?
A. 12 years
B. 24 years
C. 36 years
D. 48 years
E. None of the above
39. A charge for capital used in a farmer's cattle herd is usually included
in an enterprise budget regardless of whether he borrowed money to buy the cows
or not. This illustrates the principle of
A. marginal cost.
B. fixed cost.
C. opportunity cost.
D. variable cost.
E. alternative cost.
40. Net worth is a measure of
A. managerial ability.
B. financial position.
C. profitability.
D. liquidity.
E. All of the above
41. A feedlot operator buys feeder steers, finishes them, and sells them.
The operator estimates that finished steers will sell for $67 per cwt. and that
it will cost $175 per head to bring them from the 750 pound purchase weight to
the 1100 pound selling weight. What is the highest price the operator can pay
for 750 pound feeder steers to break even?
A. $64.77/cwt.
B. $67.60/cwt.
C. $70.27/cwt.
D. $74.93/cwt.
E. None of the above
42. Due to a sharp increase in hog numbers, average hog prices were much
lower in 2002 than in 2001. Demand for corn to feed to hogs _____________ in
2002 compared to 2001.
A. increased
B. decreased
C. did not change
43. The Pig Palace Custom Feedlot purchased a group of weaner pigs weighing
10 pounds each and sold them weighing 260 pounds after feeding them for 175
days. Each pig ate 760 pounds of feed during the feeding period. Average daily
gain for each pig in the group during the feeding period was
A. 1.43 pounds per day.
B. 1.67 pounds per day.
C. 2.08 pounds per day.
D. 3.25 pounds per day.
E. None of the above
44. The main reason for hedging is
A. to make more profit.
B. to insure against a production loss.
C. to reduce the price risk associated with producing or storing a
cash commodity.
D. to take an opposite position from the speculator.
E. None of the above
45. Cooperatives pay patronage refunds according to
A. one man, one vote.
B. size of farm.
C. amount of business done by patron.
D. total assets.
E. All of the above
46. Roundup Ready soybeans are now widely used by farmers. This has caused
the demand curve for Treflan (a grass control herbicide for soybeans) to move
A. upward and to the right.
B. downward and to the left.
C. not at all.
D. None of the above
47. A farm business can deduct interest paid for
A. a home mortgage.
B. land purchase.
C. operating capital.
D. All of the above
E. None of the above
Farmer Douglas will buy 800 pound steers in late October. He will have to pay
$80 per hundredweight for the 800 pound steers. Expected annual prices for 1150
pound steers is $74 per cwt. However, there is normally seasonal variation in
fed cattle prices. The monthly price indexes for slaughter steers are:
Index Index
January 102 July 96
February 103 August 97
March 104 September 98
April 103 October 99
May 100 November 101
June 97 December 100
48. What price for 1150 pound steers can Mr. Douglas expect for an April
selling date?
A. $71.84 per cwt.
B. $74.00 per cwt.
C. $76.22 per cwt.
D. $77.00 per cwt.
E. None of the above
49. What price can Mr. Douglas expect for a May selling date?
A. $71.84 per cwt.
B. $74.00 per cwt.
C. $76.22 per cwt.
D. $77.00 per cwt.
E. None of the above
50. Assuming an April selling date and all costs (excluding purchase of the
feeder steers) total $200 per head, Mr. Douglas can expect a profit of
A. less than $0 (he would lose money).
B. $0 to $29.99 per head.
C. $30 to $69.99 per head.
D. $70 to $99.99 per head.
E. over $100 per head.
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2003 MISSOURI FFA FARM MANAGEMENT CONTEST
Problems Section
Choose the best answer and mark the corresponding numbered space on the answer
sheet. Each question is worth four (4) points. There is only one correct
answer for each question.
PROBLEM I - Balance Sheet
Using the information below, complete the net worth statement for January 1,
2003:
Land $305,000
Accounts receivable 1,800
Accounts payable 6,500
Machinery and equipment 61,000
Cows 16,000
Calves 3,600
Sows and boars 15,000
Market hogs 50,000
Checking and savings 11,225
Wheat 4,800
Hog buildings 47,000
Feed and hay 8,500
Accrued interest owed 14,900
Accrued taxes owed 15,100
House 59,000
30-year land loan balance is $198,000.
$9,000 plus interest is due February 1 of each year
10-year hog building loan balance is $44,000.
$11,000 plus interest is due August 31 of each year.
5-year tractor loan balance is $38,216.
$9,554 plus interest is due each February 1.
Current Assets: Current Liabilities:
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
Total _________________ Total __________________
Non-current Assets: Non-current Liabilities:
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
Total _________________ Total __________________
Total Assets _________________ Total Liabilities _________________
Net Worth _________________
Questions 1 through 7 refer to PROBLEM I
1. The total value of current assets on January 1, 2003, was:
A. $78,125
B. $79,925
C. $94,925
D. $110,925
E. None of the above
2. The total value of non-current assets was:
A. $472,000
B. $488,000
C. $503,000
D. $504,800
E. None of the above
3. The total value of current liabilities was:
A. $36,500
B. $46,054
C. $47,500
D. $66,054
E. None of the above
4. The total value of non-current liabilities was:
A. $250,662
B. $261,662
C. $262,216
D. $280,216
E. None of the above
5. The net worth was:
A. $191,984
B. $252,338
C. $503,000
D. $582,925
E. None of the above
6. The working capital was:
A. $13,871
B. $79,925
C. $250,332
D. $544,209
E. None of the above
7. The debt to asset ratio was:
A. 0.60
B. 0.54
C. 0.50
D. 0.46
E. None of the above
PROBLEM II -- Enterprise Budget
Use the following soybean budget to answer Questions 8 through 16.
SOYBEANS, per acre, bottomland (loam soil), owned equipment
__________________________________________________________________________
Operating Inputs Units Price Qty. Value Your Value
Soybean seed Lbs. 0.250 45.000 $11.25 __________
Nitrogen (N) Lbs. 0.250 15.000 3.75 __________
Phosphate (P2O5) Lbs. 0.110 40.00 4.40 __________
Potash (K2O) Lbs. 0.080 40.00 3.20 __________
Pre-emerg. herbicide Acre 14.020 1.000 14.02 __________
Post-emerg. herbicide Acre 4.690 1.000 4.69 __________
Rent fert. spreader Acre 2.350 1.000 2.35 __________
Annual operating capital Dol. 0.107 23.335 2.49 __________
Machinery labor Hour 6.00 2.027 12.16 __________
Mach. fuel, lube, repair Dol. 18.50 __________
Total operating costs $76.81 __________
Fixed costs
Machinery: Amount Value
Interest at 10.675% 184.00 19.64 __________
Depr., taxes, insurance 24.21 __________
Total fixed costs 43.85 __________
Production Units Price Quantity Value
Soybeans Bu. 5.90 34.00 200.60 __________
Total receipts 200.60
Returns above total operating costs 123.79 __________
Returns above all specified costs 79.94 __________
___________________________________________________________________________
8. Total operating cost per acre is:
A. $2.46
B. $76.81
C. $79.94
D. $120.66
E. None of the above
9. The return above total operating cost per acre is:
A. $79.94
B. $120.66
C. $123.79
D. $200.60
E. None of the above
10. How many pounds of fertilizer are budgeted per acre?
A. 11.35
B. 15.00
C. 44.00
D. 95.00
E. None of the above
11. What is the total budgeted interest cost per acre?
A. $2.49
B. $19.64
C. $22.10
D. $43.85
E. None of the above
12. What price per bushel is paid for seed beans? (Hint: A bushel of
soybeans weighs 60 pounds.)
A. $5.90
B. $11.25
C. $15.00
D. $45.00
E. None of the above
13. What is the total specified fertilization cost per acre? (ignore cost of
labor and operating capital)
A. $3.75
B. $7.60
C. $11.35
D. $13.70
E. None of the above
Recalculate the budget using a 7.5% interest rate and a $5.40 per bushel sales
price for soybeans, then answer the next three questions.
14. What yield will cause returns above all specified costs to equal zero?
A. 19.34 bu.
B. 20.45 bu.
C. 21.13 bu.
D. 31.59 bu.
E. None of the above
15. What will be the per acre returns above all specified costs if one-third
of the 34-bushel crop must be given to the landlord for rent of the land?
A. -$5.26
B. $8.32
C. $33.07
D. $56.92
E. None of the above
16. If one-third of the crop is given as rent, what price received for
soybeans will make the per acre receipts above all specified costs equal zero?
A. $5.03
B. $5.32
C. $5.54
D. $5.89
E. None of the above
PROBLEM III -- Income Tax Management
Use the tables at the end of this exam to calculate depreciation on the
following item.
On June 5, 2002, Sam traded combines. The old combine had a remaining
undepreciated value of $22,404. Sam paid $52,000 "boot" in the trade for the
new combine. Had Sam kept the old combine, he would have been able to claim
$8,961.60 in depreciation on it during 2002.
17. The combine is
A. 3-year property
B. 5-year property
C. 7-year property
D. 10-year property
E. None of the above
18. If Sam does not expense any of the cost of the combine and does not
claim the special 30% first year allowance, then 2002 depreciation will be equal
to ($8,961.60) the carryover depreciation on the trade-in plus which of the
following: (Use regular MACRS and mid-year convention.)
A. $2,400.36
B. $4,178.46
C. $5,571.28
D. $7,971.64
E. None of the above
19. If Sam expenses the maximum on the combine trade and claims the special
30% first year allowance and uses the mid-quarter convention and regular MACRS,
the 1/1/03 remaining book value of the new combine will be
A. $8,538.46
B. $12,932.46
C. $17,500.06
D. $40,342.46
E. None of the above
20. If Sam does not expense or claim the 30% special first year allowance
and uses the mid-year convention and straight line depreciation over the
alternate MACRS life, his 2003 depreciation will be $8,961.60 plus which of the
following:
A. $1,950.00
B. $2,600.00
C. $4,386.00
D. $6,140.40
E. None of the above
21. If Sam uses regular MACRS, then the first year the combine will appear
on Sam's January balance sheet with a zero book value will be in
A. 2008.
B. 2009.
C. 2010.
D. 2011.
E. None of the above
22. Under MACRS, a machine shed is classified as
A. 7-year property
B. 10-year property
C. 15-year property
D. 20-year property
E. None of the above
PROBLEM IV -- Supply and Demand
|
The above graph represents the supply of wheat (S), the demand for wheat in the
U.S. (DUS), the demand for wheat for export (DF), and the total demand of for
wheat (DT).
23. What is the market equilibrium price of wheat in the U.S.?
A. P1
B. P2
C. P3
D. P4
E. None of the above
24. At the market equilibrium price, how much wheat will be used in the
U.S.?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
25. At the market equilibrium price, how much wheat will be exported?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
26. Without foreign demand, the equilibrium price of wheat would be
A. P1
B. P2
C. P3
D. P4
E. P5
For Questions 27 and 28, include foreign demand and assume higher yields per
acre cause the supply to increase from S to S1
27. The increased supply of wheat should cause wheat demand to
A. shift to the left and up.
B. shift to the right and down.
C. not change.
D. None of the above
28. Higher wheat yield would cause
A. exports of wheat to go up.
B. the equilibrium price of wheat to go down.
C. Both of the above
D. the foreign demand for wheat to shift left.
E. None of the above
PROBLEM V - Marketing
In January, a farmer has 8,000 bushels of corn in the bin. He sells the corn on
April 25. Ignore commissions, storage cost, and interest.
January 15 quotes: April 25 quotes:
May futures price = $2.46 May futures price = $2.55
Expected basis = $0.10 under the board Basis = $0.05 under the board
Strike -- May Premiums --- -- May Premiums ---
price Call Put Call Put
$2.20 $0.43 $0.07 $0.33 $0.01
$2.30 $0.33 $0.14 $0.24 $0.03
$2.40 $0.24 $0.22 $0.16 $0.05
$2.50 $0.16 $0.31 $0.09 $0.11
$2.60 $0.09 $0.41 $0.04 $0.20
29. What is the cash price of corn on April 25?
A. $2.35
B. $2.40
C. $2.45
D. $2.50
E. None of the above
30. If the farmer sold one 5,000-bushel futures contract on January 15 and
bought back the contract on April 25, what would be the realized price per
bushel (cash + net on futures) for his corn?
A. $2.32
B. $2.39
C. $2.41
D. $2.44
E. None of the above
31. If the farmer sold two 5,000-bushel futures contracts on January 15 and
bought both back on April 25, what would be the realized price per bushel (cash
+ net on futures) for his corn?
A. $2.32
B. $2.39
C. $2.41
D. $2.44
E. None of the above
32. If the farmer bought one 5,000-bushel $2.30 Put on January 15 and sold
the Put on April 25, what would be the realized price per bushel (cash + net on
options) for his corn?
A. $2.39
B. $2.43
C. $2.45
D. $2.50
E. None of the above
33. If the farmer bought two 5,000-bushel $2.30 Puts on January 15, and sold
the Puts April 25, what would be the realized price per bushel (cash + net on
options) for his corn?
A. $2.28
B. $2.36
C. $2.39
D. $2.43
E. None of the above
34. If the farmer sold his corn on January 15 for $2.32 per bushel and
bought one 5,000-bushel $2.30 May call, then sold the Call on April 25, his
realized price per bushel (cash + net on options) would be:
A. $2.21
B. $2.23
C. $2.41
D. $2.44
E. None of the above
PROBLEM VI - Inflation
The table below shows average nominal commodity prices and the Consumer Price
Index (1967=100) for various years. Use this data to answer questions 35-40.
Year CPI Corn Hogs Steers Oil
$/bu. $/cwt. $/cwt. $/barrel
2000 515.8 1.82 42.41 69.65 26.73
1998 488.3 2.43 31.82 61.47 10.87
1996 469.9 3.24 53.40 65.21 18.46
1990 391.4 2.36 54.55 77.40 20.03
1985 322.2 2.62 44.50 58.37 24.09
1975 161.2 3.02 48.32 41.89 7.67
1970 116.3 1.16 21.95 29.36 3.18
1967 100.0 1.24 19.37 25.29
1965 94.5 1.17 21.30 24.99
1960 88.7 1.04 15.96 25.09
1955 80.2 1.43 15.19 22.16
1950 71.1 1.24 18.52 28.88
35. What price would a bushel of corn have needed to be in 2000 to have the
same inflation adjusted price as in 1967?
A. $9.39
B. $6.40
C. $5.16
D. $4.81
E. None of the above
36. Which of these four commodities increased faster than inflation between
1970 and 2000?
A. Corn
B. Hogs
C. Steers
D. Oil
E. None of the above
37. Which of these four commodities did the poorest job of keeping up with
inflation between 1970 and 2000?
A. Corn
B. Hogs
C. Steers
D. Oil
E. None of the above
38. Adjusted for inflation, corn prices were highest in
A. 1950
B. 1955
C. 1975
D. 1996
E. None of the above
39. Adjusted for inflation, steer prices were lowest in
A. 1955.
B. 1970.
C. 1985.
D. 1998.
E. None of the above
PROBLEM VII - Time Value of Money
Use the following information to answer Questions 40-46.
Present Future Present
Value of Value of Value of
N a $1 a $1 Annuity
1 0.9346 1.0700 0.9346
2 0.8734 1.1449 1.8080
3 0.8163 1.2250 2.6243
4 0.7629 1.3108 3.3872
5 0.7130 1.4026 4.1002
6 0.6663 1.5007 4.7665
40. What is the present value of a dollar to be received in 4 years?
A. 71.30 cents
B. 76.29 cents
C. $1.31
D. $3.39
E. None of the above
41. A field of alfalfa will produce $1,000 during the first year, $3,000
during each of the next 4 years and $2,000 in the sixth year. To the nearest
dollar, what is the present value of this income stream?
A. $10,431
B. $11,764
C. $12,301
D. $13,633
E. None of the above
42. A beef cow produces after-tax returns at the end of the year of $70/year
for 5 years and can be sold for $400 after-tax at the end of the fifth year.
Assume the above table uses the appropriate discount rate and determine the
current value of the cow to the nearest dollar.
A. $468
B. $478
C. $496
D. $572
E. None of the above
43. With one year of income remaining in the beef cow in Question 42, how
much should she be worth, to the nearest dollar, using the above tables?
A. $406
B. $439
C. $455
D. $470
E. None of the above
44. If the farmer expects interest rates to decrease, but no change in net
returns to cattle, what impact is this likely to have on the present value of
the beef cow?
A. Decrease the present value
B. Increase the present value
C. Would not change the present value
D. Cannot tell
45. What is the annual payment on a $20,000 loan amortized over 4 years?
A. $4,166.67
B. $5,244.94
C. $5,407.86
D. $5,904.58
E. None of the above
46. What discount rate is used in the above table?
A. 7.0%
B. 8.0%
C. 9.5%
D. 10.8%
E. None of the above
PROBLEM VIII - Financial Analysis
Bill Blackacre is a cash basis taxpayer. His farm records for 2002 show the
following:
2002 Farm Sales $166,976
2002 Interest Paid 9,475
2002 Net Farm Profit 37,801
2002 Depreciation 40,560
2002 Loss in Inventory 29,800
1/1/03 Total Assets 912,689
1/1/03 Total Liabilities 100,972
47. Bill's capital turnover rate (sales plus inventory change divided by
assets) is
A. 4.14%
B. 15.03%
C. 24.29%
D. 30.82%
E. None of the above
48. Bill's interest expense as a percent of sales is
A. 9.47%.
B. 7.22%.
C. 5.67%.
D. 3.77%.
E. None of the above
49. Bill's net farm profit does not include a charge for his own labor
(which he values at $20,000 per year). Bill will have to pay self-employment
taxes on
A. $17,801.
B. $20,000.
C. $37,801.
D. $67,625.
E. None of the above
50. Bill's operating margin (profit plus inventory change) as a percent of
sales was
A. 3.17%.
B. 4.79%.
C. 15.03%.
D. 40.49%.
E. None of the above
ANNUAL DEPRECIATION PERCENTAGES FOR 5-YR PROPERTY, 150% DB
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 15.000% 26.250% 18.750% 11.250% 3.750%
2 25.500 22.125 24.375 26.625 28.875
3 17.850 16.520 17,062 18.637 20.212
4-5 16.660 16.520 16.763 16.567 16.404
6 8.330 2.065 6.287 10.354 14.355
Total 100.000 100.000 100.000 100.000 100.000
_________________________________________________________________
ANNUAL DEPRECIATION PERCENTAGES FOR 7-YR PROPERTY, 150% DB
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 10.714% 18.750% 13.393% 8.036% 2.679%
2 19.133 17.411 18.559 19.707 20.854
3 15.033 13.680 14.582 15.484 16.386
4 12.249 12.160 12.221 12.275 12.874
5-7 12.249 12.160 12.221 12.275 12.182
8 6.124 1.520 4.582 7.673 10.661
Total 100.000 100.000 100.000 100.000 100.000
_________________________________________________________________
ANNUAL FRACTIONS FOR STRAIGHT LINE OVER N YEARS (N less than 26)
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 1/2 7/8 5/8 3/8 1/8
2-N 1 1 1 1 1
N+1 1/2 1/8 3/8 5/8 7/8
_________________________________________________________________
Depreciation formula: Basis divided by N times number from above
table.
ANNUAL FRACTIONS FOR 27 1/2 YEAR PROPERTY, REGULAR MACRS
_________________________________________________________________
Tax Month Placed in Service --
Year 1 2 3 4 5 6 7 8 9 10 11 12
1 11.5 10.5 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5
2-27 12 12 12 12 12 12 12 12 12 12 12 12
28 6.5 7.5 8.5 9.5 10.5 11.5 12 12 12 12 12 12
29 -- -- -- -- -- -- 0.5 1.5 2.5 3.5 4.5 5.5
_________________________________________________________________
Depreciation formula: Basis divided by 27 1/2 divided by 12 times
number from above table.
ANNUAL FRACTIONS FOR 39 YEAR PROPERTY, REGULAR MACRS
_________________________________________________________________
Tax Month Placed in Service --
Year 1 2 3 4 5 6 7 8 9 10 11 12
1 11.5 10.5 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5
2-39 12 12 12 12 12 12 12 12 12 12 12 12
40 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5 11.5
_________________________________________________________________
Depreciation formula: Basis divided by 39 divided by 12 times number
from above table.
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2003 STATE FFA FARM MANAGEMENT CONTEST
Key
Multiple Choice
1. C 11. C 21. D 31. A 41. D
2. B 12. B 22. A 32. C 42. A
3. A 13. B 23. A 33. B 43. A
4. A 14. D 24. B 34. D 44. C
5. C 15. C 25. D 35. E 45. C
6. B 16. A 26. B 36. C 46. B
7. C 17. C 27. C 37. A 47. D
8. A 18. C 28. B 38. B 48. C
9. D 19. C 29. A 39. C 49. B
10. B 20. B 30. A 40. B 50. C
Problems
1. B 11. E 21. C 31. B 41. B
2. C 12. C 22. D 32. B 42. D
3. D 13. D 23. D 33. B 43. B
4. A 14. C 24. B 34. E 44. B
5. E 15. B 25. A 35. B 45. D
6. A 16. A 26. B 36. D 46. A
7. B 17. C 27. C 37. A 47. B
8. B 18. C 28. C 38. C 48. C
9. C 19. E 29. D 39. D 49. C
10. D 20. B 30. D 40. B 50. B