2005 Missouri FFA
Farm Management Contest
2005 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.
Choose the best answer and mark the appropriate box on the score sheet. There
is only one correct answer to each question.
1. On a crop enterprise budget that does not include any charges for land,
which number corresponds to the maximum amount that a farmer should pay in
cash rent per acre in the short run?
A. Total operating costs
B. Returns above total operating costs
C. Total costs
D. Returns above total costs
E. None of the above
2. On a crop enterprise budget that does not include any charges for land,
which number corresponds to the maximum amount that a farmer should pay in
cash rent per acre in the long run?
A. Total operating costs
B. Returns above total operating costs
C. Total costs
D. Returns above total costs
E. None of the above
3. How many square feet are in an acre?
A. 5,280
B. 40,000
C. 43,560
D. 144,000
E. None of the above
4. A soybean producer decides to store his soybeans in the local elevator for
six months. The price at harvest is $5.50 per bushel and the elevator
charges 2 cents per bushel per month for storage plus a 5 cents per bushel
handling charge. He has 4,000 bushels to sell and must borrow money at 8%
annual interest while he stores the soybeans. What price must he receive
for his soybeans to break even and cover his storage and opportunity costs?
A. $5.57
B. $5.67
C. $5.72
D. $5.89
E. None of the above
5. A $50,000 loan amortized at 10% interest for 5 years yields annual payments
of $13,189.87. How much of the first year's payment is principal?
A. $3,189.87
B. $8,189.87
C. $11,870.88
D. $13,189.87
E. None of the above
6. For the above loan of $50,000, if the fifth and final payment includes
$1,199.08 of interest, what was the outstanding principal balance after
the fourth payment?
A. $3,189.87
B. $8,189.87
C. $11,990.79
D. $13,189.87
E. None of the above
7. A cord of fire wood is a stack that measures (in feet)
A. 2 x 4 x 8
B. 4 x 4 x 4
C. 4 x 4 x 8
D. 4 x 4 x 16
E. None of the above
8. How many pounds are in a metric ton?
A. 2,000.0
B. 2,204.6
C. 3,666.7
D. 4,012.5
E. None of the above
9. Last month, Susan refinanced her home mortgage. The old loan was a
conventional 30-year fixed rate mortgage at 5.75%. Her new loan is for 15
years at a fixed rate of 5.25%. Which of the following is true?
A. Her monthly payment will be lower with the new loan.
B. Her monthly payment will be higher with the new loan.
C. More information is needed to tell whether her payment went up
or down..
D. Interest on a mortgage for a personal residence is not deductible.
E. None of the above
10. A farmer purchases 700-pound feeder steers for $1 per pound and plans to
sell the steers at 1100 pounds. The farmer estimates the total cost of
gain to be 45 cents per pound. The nearest breakeven price when the steers
are sold at 1100 pounds is
A. 73.4 cents/pound.
B. 76.7 cents/pound.
C. 80.0 cents/pound.
D. 82.3 cents/pound.
E. None of the above
11. Using leverage to expand your business will increase profitability if your
A. return on equity is higher than the interest rate.
B. return on equity is lower than the interest rate.
C. return on assets is higher than the interest rate.
D. return on assets is lower than the interest rate.
E. None of the above
12. On April 1, Jan borrowed $25,000 to buy seed and fertilizer. On Dec. 1 she
repaid the $25,000 along with $1,208.33 interest. What annual interest
rate did she pay?
A. 7.25%
B. 8.00%
C. 9.75%
D. 10.97%
E. None of the above
13. How many total acres are included in "SW 1/4 of NE 1/4 and S 1/2 of NW 1/4
of Section 15, Twp. 10N, R4W of the 5th Principle Meridian"?
A. 80 acres
B. 120 acres
C. 160 acres
D. 320 acres
E. None of the above
14. 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
15. 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.
16. The role of price in a free market is to serve as a guide
A. in controlling quantity supplied.
B. in limiting quantity demanded.
C. in allocating consumption.
D. in deciding what, when, and how much to produce.
E. All of the above
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
18. A Subchapter S corporation can have no more than
A. 10 shareholders.
B. 15 shareholders.
C. 35 shareholders.
D. 75 shareholders.
E. There is no limit on number of shareholders.
19. Corn has an expected yield of 125 bushels per acre and has a production
cost of $200 per acre. Current market prices are $2.00 per bushel for corn
and $5.00 per bushel for soybeans. Soybeans can be raised at a production
cost of $130 per acre. At what breakeven yield per acre would soybeans
generate the same net return per acre as dryland corn?
A. 31.9 bushels
B. 36.0 bushels
C. 38.7 bushels
D. 42.0 bushels
E. None of the above
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
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.
22. How many pounds of 48% protein supplement must be mixed with 8% protein
corn to make a ton of 16% protein feed?
A. 300 pounds
B. 400 pounds
C. 550 pounds
D. 600 pounds
E. None of the above
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
24. The best example of a fixed cost in a corn production enterprise budget
would be
A. seed corn.
B. fuel and oil.
C. land ownership costs.
D. interest on operating capital.
E. machinery repairs.
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 accounting expense until it is
paid.
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 above
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 above
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
29. Andrew paid $100 per head for bottle calves in September. He has spent
$150/head on feed and vet bills. He can sell them today for $400/head. If
he keeps them another 2 months, he thinks they will bring $500 each. What
value should be put on the calves on his balance sheet today?
A. The $100/head he paid for the calves
B. The $400/head he can sell them for today
C. The $500/head he expects to receive in 2 months
D. The $100/head plus the $150/head spent on feed
E. None of the above
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
31. Sam's 2004 beginning balance sheet listed $100,000 for stored crops. Her
2004 ending balance sheet listed $120,000 for stored crops. This means
A. the bushels of crops in storage increased.
B. the price per bushel of the stored crops increased.
C. the farmer's income will be greater on an accrual basis than on
a cash basis.
D. the farmer's income will be greater on a cash basis than on an
accrual basis.
E. None of the above
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 above
33. Which of the following would increase a crop farm's capital turnover ratio?
A. Higher yields
B. Higher crop prices
C. Lower land prices
D. All of the above
E. None of the above
34. For property acquired after 2/27/04, the taxpayer has the option of adding
the remaining basis of the trade-in to the "boot" paid and depreciating the
total as one item. If the taxpayer elects this option, he/she
A. can expense the rolled over basis of the trade-in.
B. can claim the special first year allowance on the rolled over
basis of the trade-in.
C. must use the mid-quarter convention.
D. must use the alternative straight-line method of depreciation.
E. None of the above
35. For self-employed individuals whose income is above the wage base, the
Medicare tax rate is
A. 1.5%
B. 2.9%
C. 5.8%
D. 6.5%
E. None of the above
36. A producer sells 7 feeder steers for $102/cwt. The average weight per
steer is 700 pounds. There is a 2.5% sales commission and yardage fees of
$2.30 per head. The net amount received for the pen of steers would be
A. $4,256.20
B. $4,240.80
C. $4,618.00
D. $4,856.95
E. None of the above
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 above
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 above
39. If the total cost of producing 100 units of output is $500 and the average
variable cost is equal to $2, then which of the following statements is
true?
A. Total variable cost of the 100 units is $400.
B. Total fixed cost is equal to $100.
C. Average fixed cost is equal to $4.
D. Average total cost is equal to $4.
E. None of the above is true.
40. The maximum Section 179 expensing deduction that can be claimed in 2004 is
A. $25,000.
B. $40,000.
C. $100,000.
D. $102,000.
E. None of the above
41. Which of the following would not appear on a cash flow statement?
A. Interest paid on a loan for a tractor
B. Principal paid on a loan for a tractor
C. Depreciation expense on a tractor
D. Rental payment received from the neighbor who used the tractor.
E. None of the above
42. In order to claim the maximum allowable Section 179 expensing deduction in
2004, the amount of qualified property placed in service during 2004 must
be no more than
A. $100,000.
B. $200,000.
C. $400,000.
D. $410,000.
E. None of the above
43. The special 50% first year allowance for depreciation is available for
property acquired after 5/5/03 and placed in service before
A. 9/10/04.
B. 1/1/05.
C. 5/5/05.
D. 1/1/06.
E. None of the above
44. An increase in total operating costs of $20 per acre will increase the
breakeven price of the crop by how much if the yield is 100 units per acre?
A. $0.02 per unit
B. $0.20 per unit
C. $2.00 per unit
D. $20.00 per unit
E. None of the above
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 $2.00 per unit.
A. 5 units
B. 10 units
C. 20 units
D. 100 units
E. None of the above
In analyzing last year's records, Frank Farmer paid $20,000 in interest and
$10,000 in principal. His value of farm production was $300,000. His gain on
the sale of assets was $0. His net farm income was $60,000. The value of
unpaid labor and management was $20,000. His depreciation totaled $30,000. His
average assets totaled $1,000,000 and his average net worth was $400,000. Hint:
Value of farm production equals net farm income plus interest plus depreciation
plus gain or loss on sale of assets plus operating expenses.
46. What was his rate of return on equity?
A. 10%
B. 15%
C. 20%
D. 30%
E. None of the above
47. What was his operating ratio?
A. 55%
B. 63%
C. 69%
D. 75%
E. None of the above
48. What was his turnover?
A. 0%
B. 5%
C. 30%
D. 50%
E. None of the above
49. If the rate of return to assets is 10%, and the average interest rate is
8%, what would the debt-to-asset ratio need to be for Frank in order for
him to earn a rate of return on equity of 14%?
A. 25%
B. 50%
C. 67%
D. 75%
E. None of the above
50. If Frank's turnover is 40%, assets are $500,000, and rate of return to
assets is 8%, what is his value of farm production?
A. $100,000
B. $200,000
C. $300,000
D. $400,000
E. None of the above
--------------------------------------------------------------------------------
2005 MISSOURI FFA FARM MANAGEMENT CONTEST
Problems Section
Choose the best answer and mark the corresponding numbered space on the answer
sheet. Computations may be done in the margins or on the back of the paper.
Each question is worth four (4) points. There is only one correct answer for
each question.
PROBLEM I - Market Value Balance Sheet
Using the information below, complete the net worth statement for
January 1, 2005:
Land $500,000
House 140,000
Machinery and equipment 85,000
Cows 30,000
Calves 15,000
Accounts payable 5,100
Autos 35,000
Sows and boars 20,000
Feeder pigs 11,000
Checking and savings 12,250
Soybeans 9,000
Hog buildings 75,000
Feed and hay 9,510
Accounts receivable 2,500
Accrued interest owed 15,105
Accrued taxes owed 8,300
30-year land loan balance is $210,00.
$10,500 plus interest is due March 1 of each year.
5-year tractor loan balance is $14,460.
$4,820 plus interest is due August 31 of each year.
15-year home loan balance is $88,000.
$4,000 plus interest is due each March and September.
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, 2005, was
A. $59,260
B. $79,260
C. $109,260
D. $114,260
E. None of the above
2. The total value of non-current assets was
A. $607,295
B. $885,000
C. $1,155,400
D. $1,177,400
E. None of the above
3. The total value of current liabilities was
A. $19,320
B. $28,505
C. $47,825
D. $51,825
E. None of the above
4. The total value of non-current liabilities was
A. $259,640
B. $289,140
C. $299,640
D. $319,460
E. None of the above
5. The net worth was
A. $600,740
B. $660,260
C. $885,000
D. $944,260
E. None of the above
6. The current ratio was
A. 0.71
B. 0.81
C. 1.14
D. 1.41
E. None of the above
7. The debt to equity ratio was
A. 0.377
B. 0.565
C. 0.773
D. 1.769
E. None of the above
PROBLEM II -- Enterprise Budget
Use the following alfalfa budget to answer Questions 8 through 16.
ALFALFA HAY, irrigated, circular sprinkler, all equipment owned,
conventional bale
________________________________________________________________________________
Operating Inputs Units Price Qty. Value Your Value
Establishment, prorate Ac 131.380 .200 $26.30 __________
Insecticide Ac 13.500 1.660 22.41 __________
Phosphorus (P205 ) Lbs 0.110 100.000 11.00 __________
Rent fertilizer spreader/ac. Ac 2.440 1.000 2.44 __________
Baling wire Bale .120 195.000 23.40 __________
Annual operating capital $ .105 11.163 1.18 __________
Machinery labor H 6.000 3.215 19.29 __________
Irrigation labor Hr 6.000 1.775 10.65 __________
Mach. fuel, lube, repairs $ 39.56 __________
Irrig. fuel, lube, repairs $ 131.67 __________
Total operating costs $287.90 __________
Fixed costs
Machinery: Amount Value
Interest at 10.675% 346.90 37.03 __________
Depr., taxes, insurance 41.61 __________
Irrigation equipment:
Interest at 10.675% 485.34 51.81 __________
Depr., taxes, insurance 42.90 __________
Total fixed costs 173.35 __________
Production Units Price Quantity Value
Alfalfa hay Tons 80.00 6.50 520.00 __________
Total receipts 520.00
Returns above total operating costs 232.10 __________
Returns above all specified costs 58.75 __________
________________________________________________________________________________
8. Total operating cost per acre is
A. $58.75
B. $173.35
C. $232.10
D. $287.90
E. None of the above
9. The return above total operating cost per acre is
A. $58.75
B. $173.35
C. $232.10
D. $287.90
E. None of the above
10. How many hours of labor are budgeted per acre?
A. 1.775
B. 3.215
C. 4.990
D. 6.000
E. None of the above
11. What is the average weight of the hay bales?
A. 50.0 pounds
B. 66.7 pounds
C. 75.0 pounds
D. 82.5 pounds
E. None of the above
12. What is the total budgeted interest cost per acre?
A. $37.03
B. $51.81
C. $88.84
D. $90.02
E. None of the above
13. How many tons of hay are produced in a 40-acre field?
A. 40
B. 80
C. 260
D. 520
E. None of the above
14. What was the cost per acre to establish the stand of alfalfa?
A. $26.30
B. $131.38
C. $287.90
D. Not enough information given
E. None of the above
Some adjustments need to be made to the budget. Fertilizer and labor costs
are too low.
15. If fertilizer (P205) costs 25 cents per pound and the fertilizer spreader
costs $3 per acre, how much will per acre costs increase?
A. $9.00
B. $9.56
C. $10.00
D. $14.56
E. None of the above
16. With the higher fertilization costs and labor at $8 per hour, what will be
the expected per acre return over all budgeted costs? (ignore changes in
capital costs.)
A. $34.21
B. $40.66
C. $48.77
D. $183.33
E. None of the above
PROBLEM III -- Income Tax Management
Use the tables at the end of this exam to calculate depreciation on the 3
following items.
On June 15, 2004, Dave bought a used combine. Dave paid $25,000 "down" and
financed the remaining $25,000 over 3 years at 8% interest.
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 Dave does not expense any of the cost of the combine and does not claim
the special first year allowance, then 2004 depreciation will be (use
regular MACRS and mid-year convention)
A. $1,607.10
B. $2,678.50
C. $2,812.50
D. $5,357.00
E. None of the above
19. If Dave expenses $10,000 of the combine cost and claims the special first
year allowance and uses the mid-quarter convention and regular MACRS, then
1/1/05 remaining book value will be
A. $6,495.52
B. $17,321.40
C. $19,475.42
D. $22,517.82
E. None of the above
20. If Dave expenses the maximum allowable on the combine and uses the special
first year allowance and uses regular MACRS, then 1/1/05 remaining book
value will be
A. $0
B. $1,071.40
C. $4,160.75
D. $11,160.75
E. None of the above
21. If Dave neither expenses nor claims the special first year allowance and
uses the mid-year convention and straight line depreciation over the
alternate MACRS life, his 2004 depreciation will be
A. $750
B. $1,000
C. $1,250
D. $2,500
E. None of the above
22. Under MACRS, a crop irrigation well is classified as
A. 10-year property
B. 15-year property
C. 20-year property
D. not depreciable
E. None of the above
PROBLEM IV -- Supply and Demand
2005 Missouri FFA Farm Management Graph for Exam
The above graph represents the supply of cotton (S), the demand for cotton in
the U.S. (DUS), the demand for cotton for export (DF), and the total demand for
cotton (DT).
23. What is the market equilibrium price of cotton 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 cotton 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 cotton will be exported?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
26. Without foreign demand, the equilibrium price of cotton would be
A. P1
B. P2
C. P3
D. P4
E. P5
For Questions 27 and 28, include foreign demand and assume new high-yielding
cotton varieties cause the supply to increase from S to S1
27. The increased supply of cotton should cause cotton 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 cotton yields would cause
A. exports of cotton to go up.
B. the equilibrium price of cotton to go down.
C. Both of the above
D. the foreign demand for cotton to shift left.
E. None of the above
PROBLEM V - Marketing
On March 5, a farmer puts 100 head of steers on feed. He sells them as
slaughter cattle on August 5. Ignore commissions, and interest.
March 5 quotes: August 5 quotes:
August futures price = $81.50 August futures price = $75.10
Expected basis = $1.00 under the board Basis = $0.80 under the board
Strike ---- Premiums ---- ---- Premiums ----
price Call Put Call Put
$76.00 $6.05 $0.55 $1.40 $1.21
$78.00 $4.35 $1.15 $0.50 $2.62
$80.00 $3.10 $1.85 $0.25 $4.50
$82.00 $2.10 $2.75 $0.05 $6.11
$84.00 $1.37 $4.00 $0.02 $7.95
29. What is the cash price of slaughter cattle on August 5?
A. $74.30
B. $75.10
C. $75.90
D. $76.00
E. None of the above
30. If the farmer sold a futures contract on March 5 and bought back the
contract on August 5, what would be the realized price per hundredweight
(cash + net on futures) for these steers?
A. $74.30
B. $76.70
C. $78.50
D. $80.70
E. None of the above
31. If the farmer bought a $80.00 Put on March 5 and sold the Put on August 5,
what would be the realized price per hundredweight (cash + net on options)
for his steers?
A. $71.65
B. $76.95
C. $78.50
D. $80.70
E. None of the above
32. If the farmer bought a $80.00 Put and sold a $80.00 Call on March 5, and
sold the Put and bought back the Call on August 5, what would be the
realized price per cwt. (cash + net on options) for his steers?
A. $72.30
B. $74.00
C. $78.25
D. $79.80
E. None of the above
33. Given all the information in Problem V, which of the following actions
taken on March 5 turned out to be the most profitable?
A. Selling a futures contract.
B. Buying a $80 Put option.
C. Buying a $80 Put and selling a $80 Call.
D. Taking no market action.
PROBLEM VI - Time Value of Money
Use the following information to answer Questions 34-40.
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
34. A dollar invested for 5 years will be worth
A. 24.39 cents.
B. 71.30 cents.
C. $1.40.
D. $4.10.
E. None of the above
35. A field of alfalfa will produce $1,000 during the first year, $4,000
during each of the next 4 years and $3,000 in the sixth year. What is the
present value of this income stream?
A. $14,453.50
B. $14,929.60
C. $15,595.90
D. $18,157.10
E. None of the above
36. A beef cow produces after-tax returns at the end of the year of $60/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.
A. $468.20
B. $477.77
C. $495.56
D. $531.21
E. None of the above
37. With one year of income remaining in the beef cow in the question above,
how much should she be worth using the above table?
A. $383.19
B. $396.72
C. $429.92
D. $470.00
E. None of the above
38. 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
39. What is the annual payment on a $25,000 loan amortized over 5 years?
A. $4,166.67
B. $5,244.94
C. $5,407.86
D. $6,097.26
E. None of the above
40. What discount rate is used in the above table?
A. 7.0%
B. 8.4%
C. 9.5%
D. 10.8%
E. None of the above
PROBLEM VII - Farm Bill Support Payments
The loan rate for soybeans is $5.00 per bushel.
The CCP trigger price for soybeans is $5.36 per bushel.
The target price for soybeans is $5.80 per bushel.
For questions 41-46 assume:
Debra finishes her soybean harvest on October 28, 2004. She harvested 10,000
bushels and put them in on-farm storage until 2005. The posted county price for
beans is $5.05 on October 28, $4.85 on November 21, and $5.00 on December 19.
41. If Debra elects to claim her Loan Deficiency Payment on October 28, she
will receive
A. $0
B. $0.05/bushel
C. $0.31/bushel
D. $0.75/bushel
E. None of the above
42. If Debra elects to claim her Loan Deficiency payment on November 21, she
will receive
A. $0
B. $0.15/bushel
C. $0.51/bushel
D. $0.95/bushel
E. None of the above
43. If Debra elects to claim her Loan Deficiency Payment on November 21, she
will receive her LDP payment for
A. 10,000 bushels
B. 85% of 10,000 bushels
C. 78% of 10,000 bushels
D. 78% of her farm's historic base production
E. None of the above
44. Debra will be able to collect a counter-cyclical payment if
A. the posted county price in December averages the loan rate.
B. the seasonal average price is under the trigger price.
C. the seasonal average price is under the target price.
D. the seasonal average price is above the trigger price.
E. None of the above
45. The fixed payment is the difference between
A. the posted county price and the loan rate.
B. the loan rate and the CCP trigger price.
C. the CCP trigger price and the target price.
D. the loan rate and the target price.
E. None of the above
46. Debra will not receive a fixed payment if
A. the posted county price is above the loan rate.
B. the seasonal average price is above the trigger price.
C. the seasonal average price above the target price.
D. her farm does not have a soybean acreage base.
E. None of the above
PROBLEM VIII - Financial Analysis
Farmer Brown is trying to analyze changes in his net worth from last year to
this year. There were no changes in his beginning and ending accrued interest,
accrued taxes, accounts payable, or inventory of non-capital assets. He neither
received nor made any gifts or inheritances. He has gathered the following
information:
Beginning checking balance $10,000
Ending checking balance $15,000
Gross cash farm operating income $200,000
Farm operating expenses (excluding debt payments) $181,000
Capital sales $50,000
Capital purchases $35,000
Money borrowed $20,000
Principal payments $22,000
Interest paid $17,000
Withdrawals from savings $5,000
Deposits to savings $0
47. What were the total cash inflows (excluding the beginning cash balance)
into the business?
A. $200,000
B. $250,000
C. $270,000
D. $275,000
E. None of the above
48. What were the total cash outflows (excluding the ending cash balance) from
the business?
A. $181,000
B. $220,000
C. $255,000
D. $260,000
E. None of the above
49. His beginning liabilities were $200,000. What are his ending liabilities?
A. $178,000
B. $196,000
C. $198,000
D. $200,000
E. None of the above
50. If total depreciation for the year was $60,000 and the capital items sold
had a remaining book value of $34,000, then the book value net worth should
have
A. decreased by $15,000.
B. decreased by $53,000.
C. decreased by $55,000.
D. decreased by $57,000.
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.
Key
2005 STATE FFA FARM MANAGEMENT CONTEST
Revised 5/06/05
Multiple Choice
1. B 11. C 21. B 31. C 41. C
2. D 12. A 22. B 32. C 42. D
3. C 13. B 23. D 33. D 43. B
4. D 14. C 24. C 34. B 44. B
5. B 15. C 25. E 35. B 45. B
6. C 16. E 26. A 36. D 46. A
7. C 17. C 27. C 37. A 47. B
8. B 18. D 28. B 38. B 48. C
9. C 19. B 29. B 39. E 49. C
10. C 20. C 30. B 40. D 50. B
Problems
1. A 11. B 21. D 31. B 41. A
2. B 12. D 22. B 32. D 42. B
3. D 13. C 23. D 33. A 43. A
4. B 14. B 24. B 34. C 44. B
5. E 15. D 25. A 35. C 45. C
6. C 16. A 26. B 36. D 46. D
7. B 17. C 27. C 37. C 47. D
8. D 18. D 28. C 38. B 48. C
9. C 19. B 29. A 39. D 49. C
10. C 20. A 30. D 40. A 50. D