fm6e-chapter04 - Farm Management Chapter 4 Depreciation and...

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Farm Management Chapter 4 Depreciation and Asset Valuation
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farm management chapter 4 2 Chapter Outline Depreciation Depreciation Methods Income Tax Depreciation Valuation of Assets
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farm management chapter 4 3 Chapter Objectives 1. Define depreciation and related terms 2. Illustrate the different methods of computing depreciation 3. Compare economic and income tax depreciation 4. Outline the different methods that can be used to value farm and ranch assets
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farm management chapter 4 4 Depreciation Defined as the annual loss in value of durable assets due to use, wear, tear, age, and obsolescence A business expense that reduces annual profit A reduction in the value of an asset
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farm management chapter 4 5 Assets that May Be Depreciated a useful life of more than one year a determinable useful life but not an unlimited life a use in business Examples: vehicles, machinery, equipment, building, fences, purchased breeding livestock, wells. Land is not depreciable, but some improvements to land (e.g. drains) are depreciable.
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farm management chapter 4 6 Depreciation Terms Cost : the price paid for the asset Useful life : number of years the asset is expected to be used in business Salvage value : expected market value of the asset at the end of its useful life Book value : the asset’s original cost less accumulated depreciation
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farm management chapter 4 7 Depreciation Methods Straight Line Declining Balance
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farm management chapter 4 8 Straight Line
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This note was uploaded on 11/15/2011 for the course AGEC 7100 taught by Professor Duffy,p during the Fall '08 term at Auburn University.

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fm6e-chapter04 - Farm Management Chapter 4 Depreciation and...

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