Howard Bowen is a large-scale cotton farmer. The land and machinery he own has a current market value of $4 million. Bowne owes his local bank $3 million. Last year Bowen sold $5 million worth of cotton. His variable operating costs were $4.5 million: accounting depreciation was $40,000, although the actual decline in value of Bowen's machinery was $60,000 last year. Bowne paid himself a salary of $50,000 which is not considered part of his variable operating costs. Interest on his bank loan was $400,000. If Bowen worked for another famer or a local manufacture, his annual income would be about $30,000. Bowen can invest any funds that would be derived, if the farm were sold, to earn 10 percent annually.
A. Compute Bowen's accounting profits