AGEC 2020 Exam 2 questions well
answers graded A+ updated
Income statement - correct answer ✔✔summarizes revenue and expenses during a specific
period of time (generally 1 year)
Equation for Net Farm Income (NFI) - correct answer ✔✔Gross Revenue - Total Expenses = NFI
Cash-basis approach - correct answer ✔✔revenue and expenses occur when cash is received or
paid
Accrual approach - correct answer ✔✔revenues & expenses exist whenever they're earned or
incurred regardless of when the cash transaction occurs
e.g. grain harvested placed in storage, accounts payable, and accrued expenses (interest)
Operating expenses - correct answer ✔✔costs associated with costs incurred producing
revenues during the specific accounting time period
e.g. production input costs (feed, fertilizer, seed, fuel, etc), marketing expenses (transportation
costs, commission fees), accounts payable, general expenses (utilities, insurance, office,
supplies, etc.)
Where does 'Gain or Loss on Capital Asset' often show up in an income statement? - correct
answer ✔✔revenue section
, Is 'Gain or Loss' always recognized? - correct answer ✔✔No, only when the asset is actually
sold.
Depreciable assets - correct answer ✔✔Difference between the selling price and the asset's
book value
Depreciation - correct answer ✔✔the annual loss in value due to use, wear, tear, age, and
technical obsolescence
business expense that reduces annual profit & the value of the asset
must have a useful life for more than 1 year and be used in the business
Examples of depreciable asset on a farm or ranch - correct answer ✔✔vehicles, machinery,
equipment, buildings, fences, wells, and purchased breeding livestock
Equation for depreciation - correct answer ✔✔Original cost - Asset's current market value
this method requires sale or appraisal of asset
Cost - correct answer ✔✔the price paid for the asset including taxes, delivery fees, installation,
etc.
expenses directly related to placing the asset into use
Useful life - correct answer ✔✔the number of years the asset is expected to be used in the
business
answers graded A+ updated
Income statement - correct answer ✔✔summarizes revenue and expenses during a specific
period of time (generally 1 year)
Equation for Net Farm Income (NFI) - correct answer ✔✔Gross Revenue - Total Expenses = NFI
Cash-basis approach - correct answer ✔✔revenue and expenses occur when cash is received or
paid
Accrual approach - correct answer ✔✔revenues & expenses exist whenever they're earned or
incurred regardless of when the cash transaction occurs
e.g. grain harvested placed in storage, accounts payable, and accrued expenses (interest)
Operating expenses - correct answer ✔✔costs associated with costs incurred producing
revenues during the specific accounting time period
e.g. production input costs (feed, fertilizer, seed, fuel, etc), marketing expenses (transportation
costs, commission fees), accounts payable, general expenses (utilities, insurance, office,
supplies, etc.)
Where does 'Gain or Loss on Capital Asset' often show up in an income statement? - correct
answer ✔✔revenue section
, Is 'Gain or Loss' always recognized? - correct answer ✔✔No, only when the asset is actually
sold.
Depreciable assets - correct answer ✔✔Difference between the selling price and the asset's
book value
Depreciation - correct answer ✔✔the annual loss in value due to use, wear, tear, age, and
technical obsolescence
business expense that reduces annual profit & the value of the asset
must have a useful life for more than 1 year and be used in the business
Examples of depreciable asset on a farm or ranch - correct answer ✔✔vehicles, machinery,
equipment, buildings, fences, wells, and purchased breeding livestock
Equation for depreciation - correct answer ✔✔Original cost - Asset's current market value
this method requires sale or appraisal of asset
Cost - correct answer ✔✔the price paid for the asset including taxes, delivery fees, installation,
etc.
expenses directly related to placing the asset into use
Useful life - correct answer ✔✔the number of years the asset is expected to be used in the
business
