Qn; 1 (a) What is a farm inventory?

Qn; 1 (b) Discuss the various techniques of valuation of assets (asset valuation)

Farm inventory

Is a list of commodities held for sale, commodities in the process of inputs to be used in
production showing their quantities and attached monetary value. They include purchased feeds,
stored crops fertilizers, breeding livestock, and pesticides.

Various techniques of valuing assets

1. Market cost.

In this method, assets are valued at prices they are purchased. It is commonly used for
recently purchased assets that will be used in a short time e.g. feeders, drinkers, fertilizer,
feed knapsack sprayer and seeds.

2. Net market price

This uses market costless transportation and marketing charges i.e. livestock and their
productions, farm produced crops

3. Farm production cost method

This bases on cost of producing a commodity on the farm. Useful in evaluating farm
produced commodities that in turn will be used on other farm enterprise. E.g. farm produced
feed for livestock, farm made compost.

4. Cost method

The cost method is the easiest way of asset valuation. It is done by basing the value on the
price for which the asset was bought.