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Quiz 4 Answers
1. Cooperative members capitalize
their business by purchasing:
a. Common Stock
b. Preferred Stock
c. Transferable Delivery Rights
2. Retained patronage refers to the
proceeds from net income generated by the cooperative allocated to users
and then kept in the business.
Per-unit retains is capital kept by
the cooperative based on the volume or units handled by the cooperative for
the users.
3. Equity capital is supplied by
the members and usually does not have a specific due date or regular rate
of interest. Debt capital is borrowed money and generally has a due date
and an assigned rate of interest.
4. Sources of long-term credit are:
Commercial banks
National Cooperative Bank
CoBank
Commercial paper
Leasing
Capital stock purchased by member or nonmembers
Insurance companies
State governments
5. Cooperatives do pay taxes, which
include:
Personal property tax
Social security tax
Fuel tax
Sales tax
Real estate tax
Excise tax
The liability for taxes on net earnings
(profit) for business operations is transferred to members when the net
earnings are allocated to the members, otherwise the cooperative pays the
tax.
6. The single tax principle means
the profits of the business are taxed only one time either at the business
level or at the member level.
7. (S) Sources of cash (U) Uses of cash
for the business
(S) Sale of fixed assets
(S) Members purchase common stock
(U) Giving customers credit
(U) Buying inventory
(S) Sale of inventory
(U) Purchasing members production
(S) Collecting accounts receivable
(S) Nonmembers purchase preferred stock
(S) Suppliers give 30 day credit
(U) Paying accounts receivables
8. Depreciation is classified as an
expense when determining the profitability of the business. The
operating statement and balance sheet show depreciation as an expense.
However, depreciation expense isn’t paid in cash like the
expenses such as salary and wages or the electric bill.
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