METHODS OF CONDUCTING COST STUDIES. 17 



value of the land in the closing farm inventory at the end of the year 

 the same as at the beginning of the year if the object is to learn the 

 net income from operation. If the land has increased in value, in 

 the opinion of the operator, this increase should be kept separate 

 from the current farm earnings. 



The common basis of land valuation for farm organization and 

 cost studies has been the conservative, going sale value of land. 

 This appears at the present time to be the most practical basis, 

 though numerous attempts have been made to apply various theories 

 in arriving at land values. 



The site value of the farm as a home has an important bearing on 

 the selling price of a farm as well as on a valuation for loan or for 

 investigational purposes. We can not ignore the fact that a farm 

 is a home site as well as a business plant, and that a certain portion 

 of its value may be due to location and the personal desire of the 

 occupant to live in that particular spot. It would doubtless be 

 advantageous to studies in farm economics to express the farm value 

 both as site value and productive value, each of which would be 

 useful, depending on the nature of the study and the use to be made 

 of the resultant figures. 



It is best to assign separate values to each of the buildings entirely 

 distinct from the value of the land and its improvements. The 

 separate values of the buildings are necessary to the proper alloca- 

 tion and distribution of the building charges. A common method 

 of arriving at the value of the bare farm is to set what is considered 

 a fair valuation for the farm as it stands, including the land, improve- 

 ments, and buildings, and then deduct the value of the buildings, 

 estimated separately. 



For some purposes it is advisable to go further and to evaluate 

 different parts of the farm at varying prices. For example, some 

 crop land is more valuable than other crop land, and very often more 

 valuable than permanent pasture, woods, and land too rough for 

 tillage purposes. 



In placing a value on a building, it is worth while to note its size 

 and jot down a brief description, along with the valuation. There 

 are two methods which may be used in arriving at the present value 

 of farm buildings. One is the common accounting practice of 

 basing the present value on the basis of the original cost and the 

 number of years it is estimated that it will be in use on the farm. 

 This is known as the " original cost basis. " The other method is that 

 of estimating the present replaceable value, depreciated, on the basis 

 of the number. of years the building has been used and the number of 

 years it is estimated it will last. 

 56389°— 21— Bull. 994- — 3 



