20 BULLETIN 994, TJ. S. DEPARTMENT OF AGRICULTURE.. 



relatively unimportant, as other factors, such as shelter, adjustment, 

 care, and. obsolescence, often affect depreciation far more than its 

 actual use. 



The high prices of farm machinery at the present time (1921) com- 

 pared with those of the prewar period (1916) make a considerable 

 difference in the results obtained by the two methods suggested 

 above. Over a ten-year period, under normal conditions, there 

 would not be a great deal of difference, but during the last year this 

 has been a much discussed question. 



The same advantages and disadvantages are apparent in valuing 

 farm equipment as mentioned under farm buildings, namely, that the 

 discrepancy between the two price levels, the original cost and the 

 present cost of machinery, is so great as to be very noticeable in esti- 

 mating the enterprise costs of machinery by the two methods. If 

 prices should show a slow decline from their present level over a 

 number of years, the use of replacement cost in estimating present 

 values of machinery consumed would prove more satisfactory than 

 if the price level should drop suddenly to its former level. Inasmuch 

 as most of the machinery now on the farm will be replaced by new 

 machinery at new prices within a five to eight year period, the orig- 

 inal cost basis will soon be reestablished. Herein the equipment 

 differs from farm buildings, as it will be a long time before the 

 present farm buildings are replaced, as compared with the replace- 

 ment of equipment. 



LIVE STOCK. 



In farm cost-accounting practice the farm live stock is divided into 

 two general classes, productive and indirectly productive or non- 

 productive, according to whether the stock under consideration is 

 directty income producing. Ordinarily the work horses are con- 

 sidered in .the indirectly productive or nonproducing class, and as 

 such are classed in the fixed capital assets of the farm. 



The most common basis of valuation for all live stock, including 

 work horses, is that of the ready sale value, regardless of the cost of 

 production. This sale value is presumed to take into account the age, 

 fitness for duty, weight, size, condition, and other factors relating to 

 the values of live stock. 



A characteristic difference between live stock and other equipment 

 is that of appreciation of animals, not only while growing to work or 

 producing age, but for a certain period after that time. A ready 

 example is the increase in value of horses up to 6 years of age and of 

 cows to 5 or 6 years of age, before they have reached what is ordinarily 

 termed "their prime." Thus it is that many farmers plan on meet- 

 ing the depreciation of producing herds and working units by the 

 raising of young stock. In cost accounting practice, however, the 



