A rural poultry farm cost 5million to set up and has a scrap value of 1million. Its stream of income before depreciation and taxes during the first 5 years is 1000000, 1200000, 1400000, 1600000, 2000000.

To calculate the depreciation of the poultry farm, we'll use the **Straight-Line Depreciation** method based on the provided details. Then, we can also calculate the income after depreciation for each of the first five years.

### Given:
- **Cost of the farm**: ₦5,000,000
- **Scrap Value (Salvage Value)**: ₦1,000,000
- **Useful Life**: 5 years

### Step 1: Calculate the Annual Depreciation Expense

Using the straight-line depreciation formula:
\[
\text{Depreciation Expense} = \frac{\text{Cost of Asset} - \text{Salvage Value}}{\text{Useful Life of Asset}}
\]
\[
\text{Depreciation Expense} = \frac{5,000,000 - 1,000,000}{5} = \frac{4,000,000}{5} = 800,000 \, \text{Naira per year}
\]

### Step 2: Calculate Income After Depreciation for Each Year

Now, let's subtract the annual depreciation from the income for each of the first five years.

| Year | Income (₦) | Depreciation (₦) | Income After Depreciation (₦) |
|------|------------|------------------|--------------------------------|
| 1    | 1,000,000  | 800,000          | 200,000                        |
| 2    | 1,200,000  | 800,000          | 400,000                        |
| 3    | 1,400,000  | 800,000          | 600,000                        |
| 4    | 1,600,000  | 800,000          | 800,000                        |
| 5    | 2,000,000  | 800,000          | 1,200,000                      |

### Summary:
- The annual depreciation for the poultry farm is **₦800,000**.
- The income after accounting for depreciation increases over the 5-year period as shown in the table.

Would you like further explanation on how these calculations were made, or do you have other questions?

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Here are some related questions you might consider:

1. How would the calculations differ if using the declining balance method?
2. What is the impact of depreciation on cash flow for the farm?
3. How does the scrap value affect the depreciation calculation?
4. How would changing the useful life of the farm affect the annual depreciation?
5. What happens if the actual scrap value at the end of the 5 years differs from the estimated scrap value?
6. How do taxes interact with depreciation in this scenario?
7. Can the depreciation method be changed during the asset's useful life?
8. How would you account for maintenance costs alongside depreciation?

**Tip:** Always consider how depreciation affects not only profit but also cash flow, as non-cash expenses like depreciation reduce taxable income without affecting cash.

Learn how to calculate depreciation and income after depreciation for a poultry farm over a 5-year period. Includes a detailed explanation using the straight-line depreciation method with specific data points.

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