SAMPLE TEST QUESTIONS BS

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Austin Peay State University *

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4501

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Finance

Date

Jan 9, 2024

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docx

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2

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SAMPLE TEST QUESTIONS – PROBLEMS (20 Points) 1. Consider the following farm balance sheet. Calculate current liabilities and Owner Equity? (2 points) Assets Liabilities Current Assets $40,000 Current Liabilities $_______ Noncurrent Assets $240,000 Noncurrent Liabilities $50,000 Total Liabilities $110,000 Owner Equity $________ Total Assets $280,000 Total Liabilities + Equity $280,000 a) What is the weakest part of this farm business’s financial position? Explain how you determined this. (2 points) b) Given the issue in part a) indicate which of the following the best way to address the problem is and briefly explain why. e.g. 1. (4 points). 1. Sell non-current assets. 2. Restructure debt 3. Obtain a larger operating loan
C. Enter each of the following assets or liabilities and its value in its proper section of the Net Worth Statement format below. Some items will require more than one entry. However, not all lines will be filled. (12 points) a. You have 200 head of feeder cattle in the feedlot that average 1,000 pounds each. Current selling price for similar cattle is $125 per hundredweight. You borrowed $150,000 from the bank 6 months ago to purchase them. Interest has been accruing at a 6% annual rate. b. A beef breeding bull purchased recently for $4,500. c. A cattle trailer that was purchased for $25,000 three years ago. You have deducted $7,000 in depreciation expense on it so far, but your neighbor recently offered to buy it from you for $21,000. d. You borrowed $20,000 to buy the trailer. You have made 2 payments of $5,000 principal each plus interest. In three months you will have to make another payment of $5,000 plus $700 interest. However, accrued interest as of today is only $500. e. You have 300 large round hay bales stored, weighing an average of 1,000 pounds each. Hay is currently selling for $140 per ton at local auctions. f. You prepaid for 1,000 gallons of diesel fuel at a price of $3.50 per gallon. Net Worth Statement for Lonesome Acres Ranch February 1, 20XX Current Assets Current Liabilities Intermediate and Long-term Assets Intermediate and Long-term Liabilities Cost Value Market Value
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