1999 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 provided. There is only one correct answer to
each question.
1. USDA is forecasting 1998-99 U.S. corn exports at 45.8
million metric tonnes. Since corn weighs 56 pounds per
bushel, this is equal to
A. 164 million bushels
B. 180 million bushels
C. 1.64 billion bushels
D. 1.80 billion bushels
E. None of the above
2. On April 10, 1998, the exchange rate between the
Japanese yen and U.S. dollars was 112 yen/dollar. On
April 10, 1999, the exchange rate was 120 yen/dollar.
This change in the exchange rate would be expected to
cause the price of U.S. goods in Japan to
A. be 7% more expensive.
B. be 7% less expensive.
C. increase by 8 yen.
D. decrease by 8 yen.
E. None of the above
3. If grain sorghum has 97% of the feeding value of corn on
a pound-for-pound basis and corn is selling for $2.25
per bushel, then a hundredweight of grain sorghum is
worth
A. $2.18
B. $3.65
C. $3.90
D. $4.02
E. None of the above
4. Corn has an expected yield of 125 bushels per acre and a
production cost of $180.00 per acre. Expected market
prices are $2.00 per bushel for corn and $5.25 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 corn?
A. 34.3 bushels
B. 36.4 bushels
C. 37.3 bushels
D. 40.2 bushels
E. None of the above
5. If high oil corn has the same production cost per acre
as regular corn but can be sold for 20 cents per bushel
more, what yield of high oil corn is needed to equal 130
bushels of regular corn at $2.25 per bushel?
A. 109.1 bushels
B. 113.2 bushels
C. 117.5 bushels
D. 119.4 bushels
E. None of the above
6. A soybean producer decides to store his soybeans in the
local elevator for four months. The price at harvest is
$5.00 per bushel and the elevator charges 2 cents per
bushel per month for storage plus a 5 cents per bushel
handling charge. He has 5,000 bushels to sell and must
borrow $25,000 at 9% 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. $5.07
B. $5.13
C. $5.23
D. $5.28
E. None of the above
7. How many pounds of 48% protein soybean meal 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
8. Which of the following is not a type bankruptcy?
A. Chapter 7
B. Chapter 11
C. Chapter 12
D. Chapter 13
E. None of the above
9. The present value of $1 received t periods in the future
discounted at rate d is
A. [1/(1+d)] to the power t
B. (1+d) to the power t
C. the sum of [1/(1+d)] to the power t
D. the sum of (1+d) to the power t
E. 1 divided by [1/(11+d)] to the power t
10. The future value of an annuity, A, invested at the end
of each period, earning d rate of interest for t periods
is
A. A times [1/(1+d)] to the power t
B. A times (1+d) to the power t
C. A times the sum of [1/(1+d)] to the power t
D. A times the sum of (1+d) to the power t
E. A times 1 divided by [1/(1+d)] to the power t
11. A farmer who wants a real rate of return on his
investment of 5% will use what discount rate if he
anticipates inflation of 2% per year?
A. 2%
B. 3%
C. 5%
D. 7%
E. None of the above
12. An increase in the rate of inflation, everything else
equal, will have what impact on the present value of a
future stream of income?
A. No impact
B. Increase the present value
C. Decrease the present value
D. Cannot tell
E. None of the above
13. Fred Brown raises corn and feeds it to his hogs. This
type of business structure is an example of
A. vertical integration.
B. horizontal integration.
C. supply company.
D. marketing cooperative.
E. None of the above
14. If the price of a commodity is too low, the demand will
be greater than the supply resulting in a
A. surplus.
B. boycott.
C. monopoly.
D. shortage.
15. For tax year 1998, a self-employed individual may deduct
_____% of his/her cost for health insurance.
A. 40%
B. 45%
C. 50%
D. 100%
E. None of the above
16. When the size of the soybean harvest exceeds locally
available farm and elevator storage, what happens to the
basis?
A. Basis narrows.
B. Basis widens.
C. Basis goes out of existence.
D. Basis is usually the same all year long.
17. The money you must deposit with a broker to insure
performance in order to trade in the futures market is
called
A. basis.
B. margin.
C. commission.
D. spread.
E. None of the above
18. The short-run supply curve for a firm is identical to
A. average variable cost.
B. average fixed cost.
C. average total cost.
D. marginal cost.
E. None of the above
19. As a farmer plants more acres of a crop, which of the
following costs is least likely to change?
A. Total variable costs
B. Average variable costs per acre
C. Average fixed costs per acre
D. Average total costs per acre
E. Both C and D
20. Average total cost is equal to
A. total variable cost divided by output.
B. total fixed cost divided by output.
C. (total variable costs + total fixed cost) divided
by output.
D. total cost x output.
E. None of the above
21. A farm business with declining average total costs has
A. increasing returns to scale.
B. decreasing returns to scale.
C. constant returns to scale.
D. decreasing demand.
E. None of the above
22. The maximum amount that a wife can inherit from her
husband without owing any federal estate tax is
A. $10,000.
B. $600,000.
C. $600,000 less excess gift tax.
D. unlimited.
E. None of the above
23. The Taxpayer Relief Act of 1997 reduced the maximum
capital gains tax rate to _____% for items (other than
collectibles) that are held more than 18 months.
A. 28%
B. 25%
C. 20%
D. 18%
E. None of the above
24. Using comparable sales for the purpose of appraising
farmland is called the
A. inventory approach to appraising.
B. earnings approach to appraising.
C. market approach to appraising.
D. cost approach to appraising.
E. None of the above.
25. If you buy a 35-pound feeder pig for 90 cents per pound
and sell the same animal at 265 pounds for 45 cents per
pound, your breakeven cost of production per pound of
gain is:
A. 30.5 cents
B. 30.9 cents
C. 36.2 cents
D. 38.2 cents
E. None of the above
26. A farmer has $150,000 of principal remaining on a
mortgage at the end of this fiscal year. The annual
principal payment is $15,000. Accrued interest at the
end of the year amounts to $8,500. The year-end balance
sheet will show:
A. non-current liabilities of $158,500.
B. current liabilities of $158,500.
C. non-current liabilities of $150,000 and current
liabilities of $8,500.
D. non-current liabilities of $135,000 and current
liabilities of $23,500.
E. None of the above
27. A producer sells 21 feeder steers for $85/cwt. The
average weight per steer is 538 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. $443.57
B. $9,314.92
C. $9,316.12
D. $9,555.00
E. None of the above
28. For tax year 1998, the social security wage base is
A. $50,000
B. $62,700
C. $65,400
D. $68,400
E. None of the above
29. A feedlot operator buys feeder steers, finishes them,
and sells them. The operator estimates that finished
steers will sell for $66 per cwt. and that it will cost
$185 per head to bring them from the 750 pound purchase
weight to the 1100 pound selling weight. What is the
breakeven price the operator can pay for 750 pound
feeder steers?
A. $72.13/cwt.
B. $73.85/cwt.
C. $78.15/cwt.
D. $93.08/cwt.
E. None of the above
30. A record keeping system which records both the addition
to equipment and the reduction of cash when an asset is
purchased is called
A. an income statement.
B. dual effect.
C. a balance sheet.
D. double entry.
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 assets.
E. None of the above
32. For 1998, the self-employment tax rate for Medicare was
A. 2.90%.
B. 7.65%.
C. 15.30%.
D. 25.00%.
E. None of the above
33. A farmer is purchasing a new baler at a cost of $24,000.
His dealer will finance the baler under the following
terms: 20% down payment with the balance repaid in
equal payments over the next five years at 9% APR. The
farmer expects the baler to last for 10 years and have a
salvage value of $4,000. How much interest will the
farmer pay the first year of the loan?
A. $1,728
B. $1,944
C. $2,160
D. $2,400
E. None of the above
Use the following information to answer questions 34-37.
In analyzing last year's records, Frank Farmer paid $10,000
in interest and $20,000 in principal. His gross revenue was
$150,000. His gain on the sale of assets was $0. His net
farm income was $20,000. The value of unpaid labor and
management was $10,000. His depreciation totaled $10,000.
His average assets totaled $200,000 and his average net
worth was $100,000. He spent $20,000 on feed for his
livestock. The cost of the feeder livestock sold was
$30,000. His inventories of market commodities was
unchanged.
34. The value of farm production was
A. gross revenue.
B. gross revenue - feed purchased.
C. gross revenue - feed purchased - cost of feeder
livestock.
D. gross revenue - feed purchased + cost of feeder
livestock.
E. None of the above
35. What was his turnover?
A. Value of farm production divided by total assets
B. Value of farm production divided by equity
C. Gross revenue divided by total assets
D. Gross revenue divided by equity
E. None of the above
36. His rate of return on equity is
A. (net farm income + interest - unpaid family labor)
divided by total assets.
B. (net farm income + interest - unpaid family labor)
divided by equity.
C. (net farm income - unpaid family labor) divided by
total assets.
D. (net farm income - unpaid family labor) divided by
equity.
E. None of the above
37. His rate of return on assets is
A. (net farm income + interest - unpaid family labor)
divided by total assets.
B. (net farm income + interest - unpaid family labor)
divided by equity.
C. (net farm income - unpaid family labor) divided by
total assets.
D. (net farm income - unpaid family labor) divided by
equity
E. None of the above
38. 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
39. 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.
40. Which of the following is considered Schedule F farm
income?
A. Cull breeding stock
B. Crop sales
C. Sales of farm equipment
D. Sale of land
E. All of the above
41. 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
42. 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
43. Frank's beginning balance sheet showed $50,000 in corn
stored at the local elevator. Which of these explains
his ending balance sheet entry of $40,000 corn stored at
the local elevator.
A. He sold $10,000 of corn during the year.
B. The price of corn was lower at the end of the
year.
C. He had less corn stored at the end of the year
than the beginning.
D. All of these could explain the decrease.
E. None of these would explain the decrease.
44. Other things equal, the value of land will be greatest
to the farmer who has the
A. longest planning horizon.
B. shortest planning horizon.
C. highest discount rate.
D. lowest discount rate.
E. None of the above
45. A Put option gives you the right to
A. buy a futures contract.
B. sell a futures contract.
C. store a commodity.
D. avoid the cash market.
E. None of the above
46. For the rules of depreciation, which of the following is
an example of "listed property"?
A. A home
B. A raised cow
C. A greenhouse
D. A passenger car
E. None of the above
47. Many farmers do a considerable amount of custom work.
Their reason for doing this is
A. to spread the fixed cost of their equipment over
more acres.
B. to earn a return to under-utilized labor.
C. to help out their neighbors.
D. to supplement on-farm income.
E. All of the above
Rich Bacon will buy 40 pound feeder pigs in March. He will
have to pay $85 per hundredweight for the pigs. Expected
annual prices for 260 pound slaughter hogs is $38 per cwt.
However, there is normally seasonal variation in prices.
The monthly price indexes for slaughter hogs thus far in the
1990s are:
Index Index
January 95 July 110
February 99 August 107
March 98 September 100
April 100 October 97
May 109 November 87
June 110 December 88
48. What price for slaughter hogs can Mr. Bacon expect for a
July selling date?
A. $38.00 per cwt.
B. $40.66 per cwt.
C. $41.80 per cwt.
D. $42.75 per cwt.
E. None of the above
49. What price can Mr. Bacon expect for an August selling
date?
A. $38.00 per cwt.
B. $40.66 per cwt.
C. $41.80 per cwt.
D. $42.75 per cwt.
E. None of the above
50. Assuming a July selling date and additional costs after
purchase of the pigs totals $70 per head, Mr. Bacon can
expect a profit of
A. less than $0 (he would lose money).
B. $0 - $4.99 per head.
C. $5 - $9.99 per head.
D. $10 - $14.99 per head.
E. over $15 per head.
-----------------------------------------------------------
1999 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
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, 1999:
Land . . . . . . . . . . . . . . . . . . . $750,000
Accounts payable. . . . . . . . . . . . . . 16,500
Machinery and equipment . . . . . . . . . . 310,000
Cows . . . . . . . . . . . . . . . . . . . 51,000
Calves . . . . . . . . . . . . . . . . . . 18,600
Sows and boars. . . . . . . . . . . . . . . 45,000
Market hogs . . . . . . . . . . . . . . . 140,000
Checking and savings. . . . . . . . . . . . 17,800
Soybeans. . . . . . . . . . . . . . . . . . 38,400
Hog buildings . . . . . . . . . . . . . . . 74,000
Feed and hay. . . . . . . . . . . . . . . . 12,500
Accrued interest owed . . . . . . . . . . . 29,660
Accrued taxes owed. . . . . . . . . . . . . 23,750
30-year land loan balance is $320,000.
$16,000 plus interest is due February 1 of each year.
7-year hog building loan balance is $44,000.
$11,000 plus interest is due August 31 of each year.
5-year equipment loan balance is $78,016.
$19,504 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, 1999,
was:
A. $68,700
B. $208,700
C. $227,300
D. $346,300
E. None of the above
2. The total value of non-current assets was:
A. $750,000
B. $1,134,000
C. $1,185,000
D. $1,230,000
E. None of the above
3. The total value of current liabilities was:
A. $69,910
B. $116,414
C. $149,414
D. $174,926
E. None of the above
4. The total value of non-current liabilities was:
A. $425,177
B. $442,016
C. $452,652
D. $511,926
E. None of the above
5. The net worth was:
A. $511,926
B. $834,483
C. $945,374
D. $1,457,300
E. None of the above
6. The current ratio was:
A. 0.351
B. 0.512
C. 1.953
D. 2.847
E. None of the above
7. The debt to worth ratio was:
A. 0.351
B. 0.542
C. 1.126
D. 1.847
E. None of the above
PROBLEM II -- Enterprise Budget
Use the following corn budget to answer Questions 8 through
16.
CORN FOR GRAIN, circular sprinkler system, 32,000 seed
population 20" water, custom harvest (combine & hauling),
shallow electric 50' well, 30' lift, 900 gpm
____________________________________________________________
Operating Inputs Units Price Qty. Value Your
Value
Corn seed Lbs. 1.40 21.30 $29.82 _______
Nitrogen (N) Lbs. 0.25 215.00 53.75 _______
Phosphate (P2O5) Lbs. 0.11 50.00 5.50 _______
Custom harvest Acre 19.00 1.00 19.00 _______
Custom hauling Cwt 0.11 180.00 19.80 _______
Rent fert. spreader/ac. Acre 2.44 3.00 7.32 _______
Pre-plant insecticide Acre 22.80 1.00 22.80 _______
Post-plant insecticide Acre 21.60 1.00 21.60 _______
Pre-emerge herbicide Acre 17.34 1.00 17.34 _______
Post-emerge herbicide Acre 18.12 1.00 18.12 _______
Annual oper. capital Dol. 0.106 70.00 7.47 _______
Machinery labor Hour 6.00 1.96 11.760 _______
Irrigation labor Hour 6.00 0.96 5.760 _______
Mach fuel, lube, repair Dol. 16.39 _______
Irrig fuel, lube, repr. Dol. 39.00 _______
Total operating costs $295.43 _______
Fixed costs
Machinery: Amount Value
Interest at 10.675% 145.54 15.54 _______
Depr., taxes, insurance 16.89 _______
Irrigation:
Interest at 10.675% 234.19 25.00 _______
Depr., taxes, insurance 26.00 _______
Total fixed costs 83.43 _______
Production Units Price Qty Value
Corn Bu. 2.50 180.00 450.00 _______
Total receipts 450.00 _______
Returns above total operating costs 154.57 _______
Returns above all specified costs 71.14 _______
___________________________________________________________
8. The return above total operating cost per acre is:
A. $71.14
B. $154.57
C. $295.43
D. $450.00
E. None of the above
9. How many hours of labor are budgeted per acre?
A. 1.96
B. 2.92
C. 12.00
D. 17.52
E. None of the above
10. What is the total budgeted interest cost per acre?
A. $15.54
B. $40.54
C. $48.01
D. $379.73
E. None of the above
11. What price per bushel is paid for seed corn? (Hint: A
bushel of corn weighs 56 pounds.)
A. $1.40
B. $21.30
C. $29.82
D. $78.40
E. None of the above
12. What is the total specified fertilization cost per acre?
(ignore cost of labor and operating capital)
A. $53.75
B. $59.25
C. $66.57
D. $74.05
E. None of the above
13. How many bushels of corn are required to cover the
specified irrigation costs per acre?
A. 20.40
B. 36.00
C. 38.30
D. 95.76
E. None of the above
14. What yield will cause returns above all specified costs
to equal zero?
A. 118.2 bu.
B. 151.5 bu.
C. 162.7 bu.
D. 186.3 bu.
E. None of the above
15. What will be the per acre returns above all specified
costs if one-third of the crop must be given to the
landlord for rent of the land?
A. -$78.86
B. $4.57
C. $71.14
D. $150.00
E. None of the above
16. If one-third of the crop is given as rent, what price
received for corn will make the per acre receipts above
all specified costs equal zero?
A. $2.63
B. $2.71
C. $3.02
D. $3.16
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 April 5, 1998, Sam traded planters. The old planter had
a remaining undepreciated value of $3,709. Sam paid $16,000
"boot" in the trade for the new planter.
17. The planter 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 planter,
then 1998 depreciation will be (use regular MACRS and
mid-quarter convention):
A. $1,714.24
B. $2,111.62
C. $2,544.67
D. $2,639.63
E. None of the above
19. If Sam expenses the maximum on the planter trade, and
uses the mid-year convention and regular MACRS, then
1998 depreciation will be:
A. $129.53
B. $161.92
C. $397.38
D. $496.75
E. None of the above
20. If Sam expenses the maximum and uses the mid-year
convention and straight line depreciation over the
alternate MACRS life, his 1998 depreciation will be:
A. $60.45
B. $85.45
C. $185.45
D. $985.45
E. None of the above
21. If Sam uses regular MACRS, then the first year the
planter will appear on Sam's January balance sheet with
a zero book value will be in
A. 2005.
B. 2006.
C. 2007.
D. 2008.
E. None of the above
22. Under MACRS, a computer is classified as
A. 3-year property
B. 5-year property
C. 7-year property
D. 10-year property
E. None of the above
PROBLEM IV -- Supply and Demand
(see graph in separate file)
The above graph represents the supply of foreign beef
available for import into the U.S. (SF), the supply of beef
produced in the U.S. (SUS), the total supply of beef in the
U.S. (ST), the foreign demand for U.S. beef (DF), the
domestic demand for beef (DUS), and the total demand for
beef (DT).
23. What is the market equilibrium price of beef 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 beef 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 beef will be
exported?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
26. Without foreign trade, the equilibrium price of beef
would be
A. P1
B. P2
C. P3
D. P4
E. None of the above
For questions 27 and 28, assume Korea, a major importer of
U.S. beef, has an economic recession and stops importing
beef.
27. The lack of Korean beef imports will cause the U.S.
market equilibrium price to
A. increase.
B. decrease.
C. not change.
D. None of the above
28. The Korean recession should cause U.S. beef exports to
A. increase.
B. decrease.
C. stay the same.
D. None of the above
PROBLEM V - Marketing
On December 1, a farmer has 5,000 bushels of corn in his
bin. He sells it on February 15. Ignore commissions,
storage cost, and interest.
December 1 quotes: February 15 quotes:
March futures price = $2.30 March futures price = $2.19
Expected basis = $0.10 Basis = $0.05 under the board
under the board
Strike --- Premiums --- --- Premiums ---
price Call Put Call Put
$1.80 $0.42 $0.01 $0.38 $0.01
$1.90 $0.32 $0.01 $0.28 $0.01
$2.00 $0.23 $0.01 $0.18 $0.01
$2.10 $0.15 $0.02 $0.09 $0.02
$2.20 $0.09 $0.08 $0.02 $0.05
$2.30 $0.04 $0.16 $0.01 $0.13
29. What is the local cash price of corn on February 15?
A. $2.14
B. $2.19
C. $2.24
D. $2.30
E. None of the above
30. If the farmer sold a futures contract on December 1 and
bought back the contract on February 15, what would be
the realized price per bushel (cash + net on futures)
for the corn?
A. $2.03
B. $2.14
C. $2.25
D. $2.41
E. None of the above
31. If the farmer bought a $2.20 Put on December 1 and sold
the Put on February 15, what would be the realized price
per bushel (cash + net on options) for his corn?
A. $2.11
B. $2.17
C. $2.20
D. $2.30
E. None of the above
32. If the farmer bought a $2.20 Put and sold a $2.20 Call
on December 1, and sold the Put and bought back the Call
on February 15, what would be the realized price per
bushel (cash + net on options) for his corn?
A. $2.10
B. $2.14
C. $2.18
D. $2.21
E. None of the above
33. Given all the information above, which of the following
actions taken on December 1 turned out to be the most
profitable?
A. Selling a futures contract.
B. Buying a $2.20 Put option.
C. Buying a $2.20 Put and selling a $2.20 Call.
D. Selling the corn on December 1.
E. Taking no market action.
PROBLEM VI - Loan Payments
Loan Amortization: You have a $10,000 loan to be paid back
over 5 periods in equal payments.
Outstanding Payment Payment
Principal Loan Portion Portion
Period before Payment Payment Interest Principal
1 $10,000.00 $2,373.96 $600.00 A
2 $8,226.04 $2,373.96 $493.56 $1,880.40
3 B $2,373.96 $380.74 $1,993.23
4 $4,352.41 $2,373.96 C $2,112.82
5 $2,239.59 $2,373.96 $134.38 D
34. The value of A is
A. $1,773.96
B. $1,788.41
C. $1,795.12
D. $1,809.44
E. None of the above
35. The value for B is
A. $6,272.91
B. $6,345.64
C. $6,363.89
D. $6,411.52
E. None of the above
36. The value for C is
A. $246.10
B. $253.91
C. $261.14
D. $272.67
E. None of the above
37. The value for D is
A. $2,184.65
B. $2,198.44
C. $2,218.68
D. $2,239.58
E. None of the above
38. What interest rate is used for this loan?
A. 6.00%
B. 7.75%
C. 8.23%
D. 17.74%
E. None of the above
39. At the beginning of last year, a farmer had an
outstanding loan for $217,480. The interest rate was
10% APR. If the farmer made one loan payment at the end
of the year of $35,000, what was the outstanding balance
at the end of the year?
A. $13,252
B. $21,748
C. $182,480
D. $204,228
E. None of the above
40. On April 1, 1998, Kate borrowed $25,000 to plant corn.
On November 1, 1998, she repaid the $25,000 along with
$1,239.58 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
PROBLEM VII - Time Value of Money
Use the following information to answer Questions 41-45.
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
41. An acre of alfalfa will net $40 during the first year, $80 at
the end of each year for the next 4 years, and $50 at the end
of the sixth year. What is the present value of this income
stream?
A. $299.68
B. $317.55
C. $386.77
D. $410.00
E. None of the above
42. 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
43. 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
44. Two tons of lime applied to an acre of soybeans is expected
to boost the yield by 3 bushels in the first year, 4 bushels
in years 2 through 4, 3 bushels in year 5, 2 bushels in year
6, and 1 bushel in year 7. If soybeans are expected to
average $5.50 per bushel, what is the present value of added
bean production?
A. $15.50
B. $29.64
C. $58.11
D. $85.26
E. None of the above
45. What is the annual payment on a $10,000 loan amortized over 6
years?
A. $2,262.44
B. $2,500.00
C. $2,604.17
D. $3,840.00
E. None of the above
PROBLEM VIII - Diminishing Returns
A farmer is looking at employing a precision ag. firm that can
apply fertilizer in 10 lb. increments. The cost of fertilizer is
50 cents per lb. Corn is selling for $2.00 per bushel. He has
one field that is a mix of Soils A and B. The field contains 100
acres with 25 acres of Soil A and 75 acres of Soil B. He has
determined that his yields will respond according to the
following table.
YIELD Incre-
Fertilizer Soil A Soil B mental VALUE OF MARGINAL YIELD
(lbs/ac) (bu/ac) (bu/ac) cost on Soil A on Soil B
---- ---- ---- ------ --------- ---------
100 90 120
110 93 128 $5.00 $6.00 $16.00
120 95 134 $5.00 $4.00 $12.00
130 96 138 $5.00 $2.00 $8.00
140 97 140 $5.00 $2.00 $4.00
150 98 141 $5.00 $2.00 $2.00
46. What is the total amount of corn which the farmer will
produce in his 100-acre field if he fertilizes the entire
field based on Soil A?
A. 11,050 bu.
B. 11,700 bu.
C. 11,925 bu.
D. 12,750 bu.
E. None of the above
47. What are his net returns above fertilizer cost for the field
if he fertilizes the entire field based on Soil A?
A. $16,600
B. $18,350
C. $19,000
D. $38,700
E. None of the above
48. What is the total amount of corn which the farmer will
produce in this field if he fertilizes the entire field based
on Soil B?
A. 11,050 bu.
B. 11,700 bu.
C. 11,925 bu.
D. 12,750 bu.
E. None of the above
49. What are his net returns above fertilizer cost for the field
if he fertilizes the entire field based on Soil B?
A. $15,350
B. $16,900
C. $19,000
D. $33,800
E. None of the above
50. What are his net returns above fertilizer cost if he
fertilizes using the precision ag. technique of applying the
profit maximizing amount on each soil type?
A. $15,550
B. $17,300
C. $19,100
D. $34,650
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.
-----------------------------------------------------------------
1999 STATE FFA FARM MANAGEMENT CONTEST
Key
Multiple Choice
1. D 11. D 21. A 31. C 41. B
2. A 12. C 22. D 32. A 42. D
3. C 13. A 23. C 33. A 43. D
4. A 14. D 24. C 34. C 44. D
5. D 15. B 25. D 35. A 45. B
6. D 16. B 26. D 36. D 46. D
7. A 17. B 27. B 37. A 47. E
8. E 18. D 28. D 38. D 48. C
9. A 19. B 29. A 39. B 49. B
10. D 20. C 30. D 40. B 50. B
Problems
1. C 11. D 21. B 31. A 41. A
2. D 12. C 22. B 32. C 42. A
3. B 13. C 23. C 33. A 43. B
4. E 14. B 24. A 34. A 44. D
5. C 15. A 25. B 35. B 45. A
6. C 16. D 26. B 36. C 46. C
7. B 17. C 27. B 37. D 47. B
8. B 18. D 28. B 38. A 48. D
9. B 19. C 29. A 39. D 49. C
10. C 20. C 30. C 40. A 50. C