Agricultural Economics 374
Spring 2000
Quiz on Co-op Finance
100 pts.
1. (10 pts.) There are two major reasons to refund retained patronage. Please list one
reason and explain why it is important.
2. (10 pts.) A current and/or potential cooperative member needs to consider returns,
or benefits, at what two levels? Give an example of each.
3. (10 pts.) A cooperative Board of Directors can distribute net income in what three
general ways?
4. (10 pts.) If a New Generation Cooperative is considering increasing its qualified
cash patronage allocation from 40% of net income to 60% of net income, what will happen to
the following cooperative level financial statement items? (Please check the appropriate
box.)
|
Increase |
Decrease |
Stay the Same |
| Net income |
|
|
|
| Co-op’s tax liability |
|
|
|
| Net cash flow |
|
|
|
| Retained patron equity |
|
|
|
| Total assets |
|
|
|
5. (10 pts.) Please list 3 of the 5 "trigger" events which can be used with a
Special Situation Plan for refunding retained patronage.
Farmers Union Cooperative Elevator
March 2000
BALANCE SHEET |
OPERATING STATEMENT |
| Assets |
|
Sales |
$25,080,000 |
| Current assets |
$4,021,000 |
CoGS |
24,600,000 |
| Fixed assets |
2,595,000 |
Gross profit |
480,000 |
| Other assets |
734,000 |
Other income |
75,000 |
| Total |
7,350,000 |
Total |
555,000 |
| Liabilities |
|
|
|
| Current liabilities |
3,156,000 |
Expenses |
369,000 |
| Term liabilities |
344,000 |
Net Income |
|
| Total |
3,500,000 |
Grain |
186,000 |
| Net Worth |
|
|
|
| Class A stock |
350,000 |
Total |
$186,000 |
| Allocated equity |
2,940,000 |
|
|
| Unallocated equity |
560,000 |
|
|
| Total |
3,850,000 |
|
|
| |
|
|
|
Selected Members |
| |
Cooperative |
Bushels |
$ |
|
| Commodity |
Bushels |
$ |
Net Income |
Bill |
Hillary |
Bill |
Hillary |
Commodity |
| Corn |
3,750,000 |
7,700,000 |
$75,000 |
40,000 |
|
80,000 |
|
Corn |
| Wheat |
1,800,000 |
6,300,000 |
45,000 |
|
21,500 |
|
60,000 |
Wheat |
| Soybeans |
2,000,000 |
10,600,000 |
66,000 |
7,200 |
60,000 |
42,000 |
420,000 |
Soybeans |
| |
7,550,000 |
24,600,000 |
186,000 |
47,200 |
81,500 |
122,000 |
480,000 |
|
6. (20 pts.) Given the above financial information, please calculate the total
patronage, cash patronage, and retained patronage allocations for Bill and Hillary,
assuming a physical individual grain allocation method. The Board of Directors has voted
to pay a 30% cash patronage refund.
Total Allocation |
Bill |
Hillary |
| Corn |
|
|
| Wheat |
|
|
| Soybeans |
|
|
| Total |
|
|
| Cash Patronage Refund |
|
|
| Retained Patronage Refund |
|
|
7. (20 pts.) Complete the following table assuming that the equity redemption program
was a 3-year revolving plan (three full years before revolvement begins), and that the
first year of patronage was 1995.
Year |
Beginning balance |
Amount
redeemed |
Retained
refunds |
Ending
balance |
1995 |
|
|
$656 |
|
1996 |
|
|
924 |
|
1997 |
|
|
1,233 |
|
1998 |
|
|
1,099 |
|
1999 |
|
|
1,301 |
|
8. (10 pts.) Given the following net income sources and basis for allocation, who is
responsible for the income taxes? (Please check the appropriate box.)
Non-521 Cooperative |
Income Source |
Allocation |
Cooperative |
Patron |
Both |
Neither |
| Non-patronage |
Unallocated Reserve |
|
|
|
|
| Member Patronage |
Qualified, Patronage to Member |
|
|
|
|
Section 521 Cooperative |
| Non-patronage |
Dividend, to Member |
|
|
|
|
| Non-member |
Unallocated Reserve |
|
|
|
|
| Member Patronage |
Qualified, Per-Unit Capital Retain |
|
|
|
|
|
|
