Exam 2 Review

Exam 2 Review - Exam #2 Review AAE 320 Paul D. Mitchell...

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Unformatted text preview: Exam #2 Review AAE 320 Paul D. Mitchell What's Covered? Two major topics since last exam 1) Farm Finance: Balance Sheets and Income Statements 2) Farm Transfer: taxes and business arrangements As an Aid: posted last two years' Exam #2 over similar topics, plus a key Balance Sheets Basic structure and how to read one Know what current, noncurrent assets and liabilities are (basic definitions) and be able to give simple examples of each Asset Valuation: Market vs Cost basis: be able to explain advantages & weaknesses, why you might want to use each Depreciation What it is and why do it How to depreciate an asset by the three methods we covered Tax depreciation may be 150% Declining Balance, but different formula Think Breaks, Problem Sets, Old Exams Look up % in table, multiply by purchase price Tax consequences and depreciation recapture Balance Sheets Liquidity and Solvency: basic definitions, How are they assessed/measured? Know how to calculate and interpret ratios: Current Ratio, Debt to Asset, Equity to Asset and Debt to Equity Ratios Basic idea of what's "typical" in Midwest crop/livestock farming, why some are low and some are high Income Statement Basic structure and how to read one Examples of cash and noncash revenues and costs (accounts receivable, inventory changes, depreciation recapture vs. depreciation and accounts payable) Why farms may want to do accrual adjustments of income statement Income Statement Know how to calculate and interpret Think Breaks/class notes, Problem Sets, old Exams for examples Basic idea of what's "typical" in Midwest crop/livestock farming Net Farm Income (Accrual Adjusted NFI) (Rate of ) Return on Assets (Rate of ) Return on Equity Operating Profit Ratio/Profit Margin Taxes and Farm Transfer Know the ways farm families can transfer business assets between generations and the tax consequences of each Assets gain value: when do you trigger what types of taxes? Sale, gift, transfer at death, trade, transfer to business Taxes: income, self employment, capital gains, gift, estate/death sale, gift, death, trade, transfer into business Taxes and Farm Transfer When you sell an asset, what taxes triggered? tractor vs cull cow/bull, vs land Expect cases to work through with numbers to show you know what's going on: Class Notes and Problem Set What is "Income Tax Basis"? Don't bury your self in the details (estate tax exclusions by year): Big picture Farm Business Arrangements Four Main types: Know basic definitions, how formed Tax consequences for income taxes and when bring assets in/out Class notes and readings very useful Again: not minor details, but Big Picture Sole Proprietorship, Partnership (general vs limited), Corporation (C vs S), and LLC Exam Preparation Class overheads and reading materials put on class web page For quantitative topics: Think Breaks and Problem Sets are good examples What to expect? Call/email if you have questions Last years' exams as example Short answer and problems to work More depth than last year's exam (less material), especially on Dr. Harris' questions ...
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This note was uploaded on 08/08/2008 for the course AAE 320 taught by Professor Mitchell during the Spring '08 term at Wisconsin.

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