Free AAC Practice Questions

Question 1

After a lender restructures a grain farm's operating line, the current ratio rises from 1.15 to 1.72. Principal formerly due within 12 months is now due later; the next 12 months of payments are correctly classified as current. No cash changes hands, no debt is forgiven, and no fees are charged. The owner calls this a reduction in leverage. Which interpretation belongs in the consultant's report?

Accepted Answer

Liquidity improved; total debt, equity, and the debt-to-asset ratio are unchanged.

Answer

Both liquidity and solvency improved because transferring debt to a term note increased the owner's equity.

Answer

Cash available for operations increased, although working capital stayed at its previous level after the restructuring.

Answer

Liquidity is unchanged because no cash was received; only the names of the liabilities have changed.

Question 2

A feedlot compares two nutritionally adequate rations in matched finishing groups. Ration A produces 3.2 lb of daily gain, uses 6.0 lb of dry-matter feed per lb gained, and costs $0.90 in feed per lb gained. Ration B produces 3.5 lb of daily gain, uses 6.6 lb of dry-matter feed per lb gained, and costs $0.84 in feed per lb gained. Health, starting weight, finishing endpoint, and carcass value are comparable; nonfeed costs do not rise with B. The manager rejects B because its conversion figure is larger. What has that decision overlooked?

Accepted Answer

B is less feed-efficient by weight but has a lower feed cost per pound gained.

Answer

A is cheaper because its lower feed-to-gain ratio means lower feed costs.

Answer

B is more feed-efficient because its feed-to-gain figure is higher.

Answer

The economic comparison is invalid until both rations' feed use is expressed on an as-fed rather than dry-matter basis.

Question 3

Parents plan to retire from day-to-day management of a mixed crop-livestock farm. Their daughter can run the business but cannot finance a land purchase. The parents need farm income and intend to retain title for now. Her siblings want eventual ownership transfers handled separately from who manages next season. Which arrangement best fits those objectives?

Accepted Answer

Lease the land to the daughter's operating business, with rent for the parents and written management authority for the daughter.

Answer

Transfer equal land interests to all children immediately and require their joint approval for operating decisions.

Answer

Employ the daughter as farm manager while the parents retain every purchasing and production decision.

Answer

Sell the land to the daughter on installments and use the purchase payments as retirement income.

Question 4

An 800-acre grain farm is considering owning a planter instead of hiring planting. Annual custom charges of $36,000 would disappear. Ownership would add $14,000 in operating costs and $18,000 in annual economic ownership costs; the latter already includes depreciation and a return on invested capital. Better timeliness is expected to add $9,000 in crop receipts, but planting the farm's crop would require giving up $3,000 of net custom-work income elsewhere. Existing farm overhead of $7,000 would not change. What annual change in economic profit should the partial budget show?

Accepted Answer

An increase of $10,000.

Answer

An increase of $3,000.

Answer

An increase of $13,000.

Answer

An increase of $28,000.

Question 5

Low-vigor strips appear in a corn field's normalized difference vegetation index (NDVI) imagery after a wet spring. The strips follow repeated wheel traffic. Ground checks find dense soil, shallow roots, and slow infiltration there; adjacent rows of the same hybrid and planting date are vigorous. Soil-test pH and nutrient results are similar, and root inspections find no insect-feeding injury. Before changing fertilizer rates, which explanation best fits the combined evidence?

Accepted Answer

Traffic-related compaction is restricting roots and water movement in the affected strips.

Answer

Nitrogen was uniformly underapplied, so the fertilizer rate should be raised across the entire field.

Answer

Root-feeding insects are the leading cause and warrant an insecticide treatment in the affected strips.

Answer

Misregistered imagery created a false pattern, so the affected strips need no investigation of field conditions.

Question 6

At the proposal meeting, a grower says, 'I can spend $12,000 before harvest, but not the full $20,000 now.' Discussion confirms that the limit concerns timing, not the total fee. The lender needs the financing analysis before harvest; the operational review can wait until afterward. Both parties could accommodate separate work phases without increasing total delivery cost. Which counterproposal addresses the actual constraint?

Accepted Answer

Phase the work and payments, preserving the full fee and the lender's deadline.

Answer

Cut the total fee to $12,000 while retaining the full scope.

Answer

Decline the assignment because there is no overlap in acceptable fees.

Answer

Postpone both deliverables until after harvest, when the grower can pay the entire fee before work starts.

Question 7

Forty-two hours after a pesticide application, a vegetable crew is scheduled to repair trellises and harvest the treated crop. The approved label specifies a 24-hour restricted-entry interval and a 7-day preharvest interval. The application has ended, all other worker-protection requirements are satisfied, and no exception changes either interval. How should the day's work be scheduled?

Accepted Answer

Permit trellis repairs, but postpone harvest until the preharvest interval has elapsed.

Answer

Permit both tasks because the restricted-entry interval has expired.

Answer

Permit harvest now if the produce remains in storage until seven days after the pesticide application.

Answer

Keep everyone out of the field until the seven-day preharvest interval ends.

Question 8

An irrigation-feasibility assignment starts with 2 working days of record reconciliation. After that, the site assessment takes 5 days and financial modeling takes 3 days; separate staff can do these tasks in parallel. A final 2-day recommendation requires both to be complete. The modeler proposes one extra day for an independent formula check. No other durations or dependencies would change. What should the project lead expect if the review is added?

Accepted Answer

9 working days; the review consumes one of two days of float on the modeling path.

Answer

10 working days; the extra review extends the assignment by one day.

Answer

8 working days; revised modeling determines when the recommendation begins.

Answer

13 working days; assessment, modeling, and review must be scheduled sequentially.

Question 9

A lender measures term-debt coverage as cash available for scheduled term principal and interest divided by those payments, and requires at least 1.25. A sole-proprietor farm projects $150,000 of accrual net farm income after $30,000 of depreciation and $24,000 of term interest; operating interest is also already deducted. Net nonfarm income is $12,000, family withdrawals are $54,000, and total income taxes are $18,000. Scheduled term principal is $96,000, in addition to the $24,000 interest. There are no leases or other repayment-capacity adjustments. Which conclusion follows?

Accepted Answer

Coverage is 1.20; scheduled payments are covered, but the lender's minimum is not met.

Answer

Coverage is 0.95; cash available falls short of scheduled term-debt payments.

Answer

Coverage is 1.00; scheduled payments are exactly covered, but the lender's minimum is not met.

Answer

Coverage is 1.50; cash available exceeds the scheduled payments and meets the lender's minimum.

Question 10

A farmer transfers machinery and future operations to a newly formed LLC. The bank accepts the LLC as the borrower, but the farmer signs a valid personal guarantee of the equipment loan. No release of that guarantee has been granted. The farmer believes the LLC now shields personal assets from this loan. What should the consultant explain about this specific loan?

Accepted Answer

The guarantee creates personal exposure even though the loan is an obligation of the LLC.

Answer

Only the LLC is exposed because it is now the borrower.

Answer

Personal exposure is limited to the farmer's percentage ownership of the LLC, regardless of the guarantee's terms.

Answer

Personal exposure disappears if the LLC elects S corporation tax treatment for the year the loan was made.

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