1997 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.
Please place your answers in the appropriate box on the score
sheet provided. There is only one correct answer to each
question.
1. An LLC (Limited Liability Company) is usually
A. taxed like a corporation.
B. taxed like a partnership.
C. not for profit and therefore not taxed.
D. illegal in Missouri.
E. None of the above
2. The IRS form used to calculate self-employment tax is
A. Schedule D.
B. Form 4797.
C. Form 4562.
D. Schedule SE
E. None of the above
3. Corn has an expected yield of 125 bushels per acre and a
production cost of $180.00 per acre. Expected market
prices are $2.60 per bushel for corn and $7.00 per bushel
for soybeans. Soybeans can be raised at a production cost
of $110 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. 36.4 bushels
C. 38.2 bushels
D. 46.4 bushels
E. None of the above
4. The maximum amount that a child can inherit from a parent
without owing any federal estate tax is
A. $10,000.
B. $182,000.
C. $600,000.
D. unlimited.
E. None of the above
5. If during this or the preceding calendar year you, as a
farmer-employer, paid cash wages of $20,000 or more to
farm workers in any calendar quarter or if you employed 10
or more farm workers for some part of a day during 20
different weeks of the year, then you
A. must pay Federal Unemployment Tax on your workers.
B. are eligible for the Farm Employer Tax Credit.
C. are exempt from paying self-employment tax.
D. have to file on Schedule C rather than Schedule F.
E. None of the above
6. The capital gains taxes that would become due if a farmer
sells 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
7. For tax year 1996, the social security wage base was
A. $35,800
B. $50,000
C. $61,200
D. $62,700
E. None of the above
8. A farmer purchases 500-pound feeder steers for 90› per
pound and plans to sell the steers at 800 pounds. The
farmer estimates the total cost of gain to be 50› per
pound. The nearest breakeven price when the steers are
sold at 800 pounds is
A. 58.13›/pound
B. 64.75›/pound
C. 75.00›/pound
D. 87.50›/pound
E. None of the above
9. How many total acres are included in "NE 1/4 of Section 15
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. 240 acres
E. None of the above
10. How much perimeter fence would be required to completely
enclose the parcel of land described in question 3?
A. 1.5 miles
B. 2.0 miles
C. 2.5 miles
D. 3.0 mile
E. None of the above
11. A soybean producer decides to store his soybeans in the
local elevator for six months. The price at harvest is
$7.20 per bushel and the elevator charges 2› per bushel
per month for storage plus a 5› per bushel handling
charge. He has 5,000 bushels to sell and must borrow
$36,000 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. $7.37
B. $7.45
C. $7.66
D. $7.95
E. None of the above
12. A farmer is purchasing a new baler at a cost of $26,000.
His dealer will finance the baler under the following
terms: 15% down payment with the balance repaid in equal
payments over the next six 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. $1,547
B. $1,638
C. $1,820
D. $1,872
E. None of the above
13. 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
14. 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. $0.840
B. $0.857
C. $1.080
D. $1.166
E. None of the above
15. Farmer Jones has $10,000 in equipment he uses exclusively
for corn. He assumes that this equipment will last 5
years and have a salvage value of $0. He plans to plant
100 acres of corn each year. Assuming an interest rate of
8%, what will be his average fixed costs per year for the
next 5 years (depreciation and interest) for this
machinery per acre of corn?
A. $10
B. $20
C. $24
D. $29
E. None of the above
16. In 1996, Pat Parker had net farm income of $35,000. Pat
had total business assets of $670,000 and total
liabilities of $350,000. Pat paid $32,000 in interest.
Rate of return on assets for 1996 would be
A. 4.8%
B. 5.2%
C. 10.0%
D. 10.9%
E. None of the above
17. How many pounds of 48% protein supplement must be mixed
with 10% protein wheat to make a ton of 16% protein feed?
A. 316 pounds
B. 400 pounds
C. 439 pounds
D. 487 pounds
E. None of the above
18. 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 $210 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. $76.14/cwt.
E. None of the above
19. A $1 deductible expense (before tax) will cost ______
after tax if the farmer's marginal tax rate is 43%.
A. $0.00
B. $0.43
C. $0.57
D. $1.00
E. None of the above
20. Your ability to pay all debts if you liquidate your
business refers to
A. liquidity.
B. equity.
C. solvency.
D. investment ratio.
E. None of the above
21. A farmer has total assets of $600,000 of which land is
$400,000. The farmer's debt:equity ratio is 0.8. What
will the farmer's debt:equity ratio be if the value of
land inflates by 10%?
A. 0.698
B. 0.714
C. 0.720
D. 0.880
E. None of the above
22. If the U.S. wheat industry has an inelastic demand curve,
an increase in the amount of wheat supplied to the market
would
A. have no effect on total revenues in the wheat
industry.
B. increase the total revenues in the wheat industry.
C. decrease the total revenues in the wheat industry.
D. cause a sharp increase in the demand for wheat.
E. None of the above
23. A farmer traded a tractor with an adjusted tax basis of
$5,000. The new tractor had a list price of $60,000. The
dealer allowed a $20,000 trade-in for the old tractor.
The farmer paid $15,000 of his own money and borrowed
$25,000 to pay the balance. What is the tax basis of the
new tractor?
A. $15,000
B. $35,000
C. $40,000
D. $45,000
E. None of the above
24. 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.
E. None of the above
25. If the grain farmer in the above problem suffers a loss on
his options contract, then this loss will be taxed as
A. an ordinary loss.
B. a capital loss.
C. a non-deductible farm expense.
D. a personal expense.
E. None of the above
26. A farmer has a debt : worth ratio of 1 : 2. The current
liabilities total $50,000 and the non-current liabilities
total $90,000. What is the value of the assets?
A. $420,000
B. $280,000
C. $210,000
D. $140,000
E. None of the above
27. A cattle feeding operation has sales of $750,000, feed
purchases of $300,000, other costs of $400,000, an opening
inventory of $380,000, and a closing inventory of
$400,000. What is the net farm income for this operation
on an accrual basis?
A. $30,000
B. $50,000
C. $70,000
D. $750,000
E. None of the above
28. Which of the following is considered Schedule F farm
income?
A. Cull breeding stock sales
B. Crop sales
C. Sales of farm equipment
D. Sale of land
E. Both A & B
29. If corn silage as fed contains 65% moisture and 2.8%
protein, the dry matter would be what percent protein?
A. 2.80
B. 3.08
C. 6.58
D. 8.00
E. None of the above
30. On April 1, 1996, Kate borrowed $25,000 to plant corn. On
March 1, 1997, she repaid the $25,000 along with $2,234.38
interest. What annual interest rate did she pay?
A. 8.50%
B. 9.25%
C. 9.75%
D. 10.50%
E. None of the above
31. The main difference between cash and accrual accounting is
that accrual accounting includes
A. a charge for unpaid family labor.
B. depreciation.
C. an adjustment for changes in inventory.
D. sales of capital assets.
E. None of the above
32. A producer sells 12 feeder steers for $78/cwt. The
average weight per steer is 625 pounds. There is a 3%
sales commission and yardage fees of $2.10 per head. The
net amount received for the pen of steers would be
A. $3,541.95
B. $4,156.20
C. $4,240.80
D. $5,649.30
E. None of the above
33. Another term for owner equity is
A. leverage.
B. liquidity
C. solvency.
D. net worth.
E. None of the above
34. If the tenant pays the entire cost of fertilizer, under
which rental agreement would he want to apply the most
fertilizer?
A. Crop share of 40% to tenant and 60% to landlord.
B. Crop share of 50% to tenant and 50% to landlord.
C. Crop share of 60% to tenant and 40% to landlord.
D. Cash rent.
E. None of the above
35. The maximum amount which can be expenses under IRS Code
Section 179 was increased to $18,000 for tax year 1997.
For 1996 the maximum was
A. $10,000
B. $15,000
C. $17,000
D. $17,500
E. None of the above
36. A beneficiary deed is an example of a
A. mortgage instrument.
B. revokable or living trust.
C. futures market security document.
D. non-probate transfer mechanism.
E. None of the above
37. Valuing assets at original cost plus capitalized
improvements minus accumulated depreciation and Section
179 expensing is called the
A. cost method.
B. market value method.
C. tax method.
D. net worth method.
E. None of the above
38. To consider the time value of money in analyzing
alternative farm investments, one should choose the
investment with the
A. highest net present value.
B. largest net cash flow over the lifetime of the
investment.
C. highest average profits over the investment
lifetime.
D. lowest cost.
E. None of the above
39. A $50,000 loan amortized at 9% interest for 15 years
yields annual payments of $6,200.00. How much of the
first year's payment is principal?
A. $1,092.61
B. $1,700.00
C. $2,592.61
D. $4,000.00
E. None of the above
40. For the above loan of $50,000, if the 15th and final
payment includes $511.93 of interest, what was the
outstanding principal balance after the 14th payment?
A. $5,688.07
B. $4,715.38
C. $4,622.77
D. $377.23
E. None of the above
41. For the above loan of $50,000, how much total interest is
paid over the life of the loan?
A. $101,852.20
B. $51,852.20
C. $43,000.00
D. $7,544.60
E. None of the above
42. Farmer Brown purchases a new tractor. A record keeping
system which records both the addition to equipment and
the reduction of cash is called
A. an income statement.
B. dual effect.
C. a balance sheet.
D. double entry.
E. None of the above
43. Specialization in crops or livestock in a farm business
tends to
A. increase income and increase risk.
B. decrease income and increase risk.
C. decrease risk and increase income.
D. decrease risk and decrease income.
44. At the beginning of last year, a farmer had an outstanding
loan for $155,000. The interest rate was 9% APR. If the
farmer made one loan payment at the end of the year of
$20,500, what was the outstanding balance at the end of
the year?
A. $134,500
B. $137,605
C. $140,550
D. $148,450
E. None of the above
45. The Chicago Mercantile Exchange has changed its hog
futures contract from a delivery system to a cash
settlement system. The reason for this change was to
A. improve convergence.
B. prevent convergence.
C. comply with CFTC regulations.
D. reduce Exchange paperwork.
E. None of the above
46. Net farm income for a farm is $50,000. The charge for
unpaid labor and management is $30,000. What is the
farmer's return to equity?
A. -$20,000
B. $20,000
C. $50,000
D. $70,000
E. None of the above
47. The tax you owe on each additional dollar of taxable
income is called the
A. Section 179 deduction.
B. straight-line tax rate.
C. marginal tax rate.
D. federal adjusted taxable income.
E. None of the above
48. A feedlot operator purchases a pen of 100 feeder steers
with an average weight of 788 pounds and sells them at an
average weight of 1041 pounds. Total feed cost for the
pen is $16,420. 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
49. A farmer should issue an IRS Form 1099 for which of the
following?
A. $750 paid to a neighbor for hay.
B. $500 paid to a neighbor for custom work.
C. $1500 paid to a neighbor for a bull.
D. $650 paid to a neighbor for land rent.
E. All of the above
50. When required, you must send an IRS Form 1099-MISC to the
individual paid by
A. December 31.
B. January 31.
C. March 1.
D. April 15.
E. 90 days after payment.
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1997 MISSOURI FFA FARM MANAGEMENT CONTEST
Problems Section
For the following problems, place your answer for each question
in 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 - Balance Sheet
The Farm Financial Standards Task Force has recommended that farm
balance sheets be prepared with two time classifications --
current and non-current. Items that had been classified as
Intermediate or Long-term are now classified as non-current.
Using the information below, complete the net worth statement for
January 1, 1997:
Land . . . . . . . . . . . . . . . . . $163,000
Autos . . . . . . . . . . . . . . . . . 22,000
Machinery and equipment . . . . . . . . 71,000
Cows . . . . . . . . . . . . . . . . . 19,000
Calves . . . . . . . . . . . . . . . . 3,500
Sows and boars. . . . . . . . . . . . . 20,000
Market hogs . . . . . . . . . . . . . 68,000
Checking and savings. . . . . . . . . . 13,555
Soybeans. . . . . . . . . . . . . . . . 10,200
Hog buildings . . . . . . . . . . . . . 125,000
Feed and hay. . . . . . . . . . . . . . 11,750
Accrued interest owed . . . . . . . . . 14,900
Accrued taxes owed. . . . . . . . . . . 17,800
30-year land loan balance is $120,000.
$9,000 plus interest is due March 1 of each year.
7-year hog building loan balance is $66,000.
$11,000 plus interest is due August 31 of each year.
5-year combine loan balance is $72,400.
$15,500 plus interest is due each February 1.
Current Assets: Short-term Liabilities:
______________________________ _______________________________
______________________________ _______________________________
______________________________ _______________________________
______________________________ _______________________________
______________________________ _______________________________
Total _________________ Total __________________
Intermediate Assets: Intermediate Liabilities:
______________________________ _______________________________
______________________________ _______________________________
______________________________ _______________________________
______________________________ _______________________________
______________________________ _______________________________
Total _________________ Total __________________
Fixed Assets: Long-term 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, 1997, was:
A. $ 96,805
B. $107,005
C. $127,005
D. $134,255
E. None of the above
2. The total value of non-current assets was:
A. $381,000
B. $398,000
C. $400,000
D. $420,000
E. None of the above
3. The total value of current liabilities was:
A. $ 32,700
B. $ 35,500
C. $ 68,200
D. $171,100
E. None of the above
4. The total value of non-current liabilities was:
A. $111,000
B. $222,900
C. $258,400
D. $291,100
E. None of the above
5. The net worth was:
A. $197,100
B. $235,905
C. $291,100
D. $527,005
E. None of the above
6. The current ratio was:
A. 0.637
B. 0.818
C. 1.142
D. 1.569
E. None of the above
7. The debt to equity ratio was:
A. 0.759
B. 0.810
C. 1.234
D. 1.471
E. None of the above
PROBLEM II -- Enterprise Budget
Use the following hog budget to answer Questions 8 through 16.
_________________________________________________________________
180 SOW CONFINEMENT SYSTEM (PER SOW)
FARROW-TO-FINISH
COMPLETE FEED MILL
Operating Inputs: Units Price Quantity Value
Starter ration Cwt. 13.000 12.206 158.67
Corn Cwt. 5.000 146.050 730.25
41-45% prot. sup. Cwt. 8.000 31.656 253.24
Base mix Cwt. 26.000 5.156 134.04
Young boar Hd. 352.400 0.028 9.79
Utilities Hd. 36.000 1.000 36.00
Trucking Hd. 3.000 22.394 67.18
Vet. medicine Hd. 2.000 22.394 44.79
Young sows Hd. 141.00 0.772 108.88
Annual operating capital % 0.107 891.550 95.17
Livestock labor Hr. 6.00 22.000 131.998
Mach. fuel, lube, repairs Dol. 70.48
Equip. fuel, lube, repairs Dol. 37.78
Total Operating Costs 1878.28
Fixed Costs: Amount Value
Machinery
Interest at 10.675% 285.13 30.44
Depr., taxes, insurance 41.95
Equipment
Interest at 10.675% 1244.27 132.83
Depr., taxes, insurance 205.51
Livestock
Sow 89.44
Boar 0.31
Interest at 10.675% 89.75 9.58
Total Fixed Costs 420.30
Production: Units Price Quantity Value
Sltr (220-240) Cwt. 40.00 52.05 2082.13
Non-breeder gilts Cwt. 36.00 0.32 11.40
Sows Cwt. 32.00 2.43 77.82
Boar Cwt. 26.00 0.14 3.61
Total Receipts 2174.97
Returns above total operating cost 296.69
Returns above all specified costs - 123.61
3 groups of 30 farrowing sows
6.5 litters/year
_________________________________________________________________
8. Total operating cost per sow is:
A. $296.69
B. $420.30
C. $1,878.28
D. $2,174.97
E. None of the above
9. The return above total operating cost per sow is:
A. -$123.61
B. $296.69
C. $2,082.13
D. $2,174.97
E. None of the above
10. How many hours of labor are budgeted per sow?
A. 6.00
B. 22.00
C. 50.75
D. 131.99
E. None of the above
11. What is the total budgeted interest cost per sow?
A. $163.27
B. $172.85
C. $258.44
D. $268.02
E. None of the above
12. What price per bushel is paid for corn?
A. $1.46
B. $2.41
C. $2.80
D. $5.00
E. None of the above
13. What are feed costs per sow? (ignore cost of operating
capital)
A. $730.25
B. $1,142.16
C. $1,276.20
D. $1,751.63
E. None of the above
14. If the price received for all hogs sold increases by $6
per cwt., what will be the per sow receipts above all
specified costs?
A. $117.61
B. $206.03
C. $329.64
D. $626.33
E. None of the above
15. How much will total operating costs per sow increase if
protein supplement costs $280 per ton? (ignore cost of
operating capital)
A. $26.76
B. $189.94
C. $291.67
D. $443.18
E. None of the above
16. If purchased boars weigh 325 pounds and purchased
replacements sows weigh 200 pounds, what is the whole herd
feed conversion?
A. 3.55
B. 3.66
C. 3.77
D. 3.93
E. None of the above
PROBLEM III -- Income Tax Management
Use the following tax tables to calculate depreciation for
questions 17 through 22.
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.
On October 5, 1996, Sam traded tractors. The old tractor had a
remaining undepreciated value of $10,688. Sam paid $15,000
"boot" in the trade for the new tractor.
17. The tractor 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 tractor,
then 1996 depreciation will be (use regular MACRS and mid-
year convention):
A. $688.18
B. $1,607.10
C. $2,752.21
D. $3,853.20
E. None of the above
19. If Sam expenses the maximum on the tractor trade, and uses
the mid-quarter convention and regular MACRS, then 1996
depreciation will be:
A. $219.36
B. $286.33
C. $401.85
D. $688.18
E. None of the above
20. If Sam does not expense and uses the mid-year convention
and straight line depreciation over the alternate MACRS
life, his 1996 depreciation will be:
A. $1,284.40
B. $1,834.86
C. $2,568.80
D. $3,669.71
E. None of the above
21. In order to use the mid-quarter convention, at least
______ percent of Sam's 1996 purchases of depreciable
property must have been made in the fourth quarter.
A. 60%
B. 50%
C. 40%
D. 33%
E. None of the above
22. Under MACRS, a grain bin 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
(insert graph)
The above graph represents the supply of foreign pork available
for import into the U.S. (SF), the supply of pork produced in the
U.S. (SUS), the total supply of pork in the U.S. (ST), the foreign
demand for U.S. pork (DF), the domestic demand for pork (DUS), and
the total demand for pork (DT).
23. What is the market equilibrium price of pork 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 pork will be
imported into the U.S.?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
25. At the market equilibrium price, how much pork will be
exported?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
26. Without foreign trade, the equilibrium price of pork would
be
A. P1
B. P2
C. P3
D. P4
E. None of the above
For questions 27 and 28, assume Taiwan, a major exporter of pork,
gets foot and mouth disease in its swine herd and has to stop
exporting pork.
27. The lack of Taiwanese pork exports will cause the U.S.
market equilibrium price to
A. increase.
B. decrease.
C. not change.
D. None of the above
28. Foot and mouth disease in Taiwan should cause U.S. pork
exports to
A. increase.
B. decrease.
C. stay the same.
D. None of the above
PROBLEM V - Marketing
On November 10, a farmer has 10,000 bushels of soybeans in his
bins. He sells them on April 5. Ignore commissions, storage
cost, and interest.
November 10 quotes: April 5 quotes:
May futures price = $6.80 May futures price = $8.30
Expected basis = $0.10 Basis = $0.05 over the board
under the board
Strike -- Premiums -- -- Premiums --
price Call Put Call Put
$6.75 $0.35 $0.30 $1.52 $0.01
$7.00 $0.20 $0.50 $1.27 $0.02
$7.25 $0.10 $0.72 $1.02 $0.03
$7.50 $0.05 $0.96 $0.78 $0.05
$7.75 $0.02 $1.21 $0.55 $0.10
$8.00 $0.01 $1.46 $0.35 $0.20
29. What is the cash price of soybeans on April 5?
A. $6.70
B. $8.25
C. $8.30
D. $8.35
E. None of the above
30. If the farmer sold a futures contract on November 10 and
bought back the contract on April 5, what would be the
realized price per bushel (cash + net on futures) for
these soybeans?
A. $6.80
B. $6.85
C. $8.30
D. $8.35
E. None of the above
31. If the farmer bought a $7.00 Put on November 10 and sold
the Put on April 5, what would be the realized price per
bushel (cash + net on options) for his soybeans?
A. $7.85
B. $7.87
C. $8.78
D. $8.83
E. None of the above
32. If the farmer bought a $7.00 Put and sold a $7.00 Call on
November 10, and sold the Put and bought back the Call on
April 5, what would be the realized price per bushel (cash
+ net on options) for his beans?
A. $6.80
B. $7.10
C. $7.40
D. $8.05
E. None of the above
33. Given all the information above, which of the following
actions taken on November 10 turned out to be the most
profitable?
A. Selling a futures contract.
B. Buying a $7 Put option.
C. Buying a $7 Put and selling a $7 Call.
D. Taking no market action.
PROBLEM VI - Profit and Loss
Jackie Jones' farm has cash revenue for the year of $200,000.
Her farm cash operating expenses for the year total $175,000.
Her farm depreciation for the year is $30,000. The value of her
livestock and grain inventory increased by $15,000 from January 1
to December 31.
Using only the above information, answer questions 34-38.
34. Jackie's cash flow for the year was
A. negative by $40,000.
B. negative by $10,000.
C. positive by $5,000.
D. positive by $25,000.
E. None of the above
35. Jackie's net farm income based on cash accounting is
A. -$5,000.
B. $0.
C. $5,000.
D. $25,000.
E. None of the above
36. Jackie's net farm income based on accrual accounting is
A. -$5,000.
B. $5,000.
C. $10,000.
D. $25,000.
E. None of the above
37. The accrual basis value of farm production is
A. $200,000.
B. $215,000.
C. $230,000.
D. $245,000.
E. None of the above
38. Jackie's taxable income based on cash accounting is
A. -$5,000.
B. $0.
C. $5,000.
D. $25,000.
E. None of the above
PROBLEM VII - Diminishing Returns
P. H. Trouble recently purchased a 320-acre farm which the local
bank had acquired. The previous owner had not applied any lime
to the farm in years. P. H. had soil tests run on each of the
fields and the results show a need for more lime than P. H. can
afford in one year. After consulting with his local extension
agronomist, P. H. develops the following table of expected
results from liming.
Expected Annual Yield Per Acre
_________________________________________________________
Field #1 Field #2 Field #3
Tons of 40 ac. 120 ac. corn-bean 140 ac.
lime alfalfa rotation fescue
applied hay Corn Beans pasture
per acre (tons) (bu.) (bu.) (AUM)
0 3.5 90 27 9.4
1 4.0 95 32 9.8
2 4.4 99 36 10.1
3 4.7 102 39 10.4
4 4.8 104 41 10.6
5 4.9 105 42 10.7
_________________________________________________________
Assume alfalfa is worth $100 per ton, soybeans $7.00 per bushel,
corn $2.50 per bushel, and fescue $7 per AUM.
Lime costs $15 per ton (delivered and spread) and should last for
5 years. Therefore, figure $3 per ton per year to compare with
the above table.
39. If money were not a constraint, how much lime should P. H.
apply to the alfalfa?
A. 2 ton per acre
B. 3 ton per acre
C. 4 tons per acre
D. 5 tons per acre
E. None of the above
40. If money is not a constraint, how much lime should P. H.
apply to the fescue pasture?
A. 1 ton per acre
B. 2 ton per acre
C. 3 tons per acre
D. 4 tons per acre
E. None of the above
41. Field #2 is annually planted to 60 acres of corn and 60
acres of soybeans with the crops being rotated within the
field. If money is not a constraint, how much lime should
P. H. apply to Field #2?
A. 2 ton per acre
B. 3 ton per acre
C. 4 tons per acre
D. 5 tons per acre
E. None of the above
42. At what value per AUM would P.H. apply 3 tons of lime per
acre to the fescue pasture in Field #3?
A. $7.50
B. $9.00
C. $10.00
D. $15.00
E. None of the above
43. Money is a constraint. P. H. can only afford to spend
$4,500 (300 tons) on lime. To which fields should this
300 tons be applied?
A. 260 tons to Field #2 and 40 tons to Field #1
B. 220 tons to Field #2 and 80 tons to Field #1
C. 180 tons to Field #2 and 120 tons to Field #1
D. 140 tons to Field #2 and 160 tons to Field #1
E. None of the above
PROBLEM VIII - Time Value of Money
Use the following information to answer Questions 49-56.
____________________________________________________
Present Future Present
Value of Value of Value of
N a $1 a $1 Annuity
1 0.913 1.095 0.913
2 0.834 1.199 1.747
3 0.762 1.312 2.509
4 0.696 1.437 3.205
5 0.635 1.575 3.840
6 0.580 1.724 4.420
____________________________________________________
44. A vineyard will produce no income during the first
year, $1,000 at the end of each year for the next 4
years and $800 at the end of the sixth year. What is
the present value of this income stream?
A. $3,391
B. $4,087
C. $5,000
D. $6,000
E. None of the above
45. A beef cow produces after-tax returns at the end of the
year of $80/year for 6 years and can be sold for $350
at the end of the sixth year. Assume the above table
uses the appropriate discount rate and determine the
current value of the cow.
A. $556.60
B. $585.60
C. $663.10
D. $836.50
E. None of the above
46. With three years of income remaining in a beef cow, how
much should she be worth using the above tables?
A. $200.72
B. $467.42
C. $479.12
D. $505.52
E. None of the above
47. 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
48. If the average tax rate is expected to increase over
the next three years so that the cow no longer nets
$80/year after taxes. What impact would this have on
your answer to question 45?
A. Increases the value
B. Decreases the value
C. No change in the value
D. Can not tell
49. What is the annual payment on a $10,000 loan amortized
over 5 years?
A. $2,500.00
B. $2,604.17
C. $3,840.00
D. $6,350.00
E. None of the above
50. What discount rate is used in the above table?
A. 8.7%
B. 9.1%
C. 9.5%
D. 10.9%
E. None of the above
----------------------------------------------------------
1997 STATE FFA FARM MANAGEMENT CONTEST
Key
Multiple Choice
1. B 11. C 21. B 31. C 41. C
2. D 12. A 22. C 32. D 42. D
3. B 13. B 23. D 33. D 43. A
4. C 14. B 24. C 34. D 44. D
5. A 15. C 25. B 35. D 45. A
6. D 16. C 26. A 36. D 46. B
7. D 17. A 27. C 37. A 47. C
8. C 18. C 28. B 38. A 48. C
9. D 19. C 29. D 39. B 49. D
10. D 20. C 30. C 40. A 50. B
Problems
1. B 11. D 21. C 31. B 41. D
2. D 12. C 22. A 32. A 42. C
3. C 13. C 23. C 33. D 43. C
4. B 14. B 24. A 34. D 44. A
5. B 15. B 25. B 35. A 45. A
6. D 16. B 26. B 36. C 46. B
7. C 17. C 27. A 37. B 47. B
8. C 18. C 28. A 38. A 48. B
9. B 19. B 29. D 39. D 49. B
10. B 20. A 30. B 40. E 50. C