How to compute bowens accounting profits

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Howard Bowen is a large-scale cotton farmer. The land and machinery he owns has a current market value of $4M. Bowen owes his local bank $3M. Last year Bowen sold $5M worth of cotton. His variable operating costs were $4.5M; accounting depreciation was $40,000, although the actual decline in value of Bowen's machinery was $60,000 last year. Bowen paid himself a salary of $50k, which isnot considered part of his variable operating costs. Interest on his bank loan was $400,000.If Bowen worked for another farmer or local manufacturer, his annual income would be about $30k. Bowen can invest and funds that would be derived, if the farm were sold, t o earn 10% annually. ( Ignore taxes). Compute Bowens accounting profits.

Reference no: EM13213479

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How to compute bowens accounting profits : Howard Bowen is a large-scale cotton farmer. The land and machinery he owns has a current market value of $4M. Bowen owes his local bank $3M. Last year Bowen sold $5M worth of cotton. His variable operating costs were $4.5M; accounting depreciatio..

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