Example 3 of a Joint Ownership Record
January 7, 2009
The following is one of four examples of an annual financial record for jointly owned machinery, as referenced in Share Machinery, Reduce Costs — Developing a Joint Ownership Agreement.
Scenario: Farmer A and Farmer B decide on the joint ownership of a new tractor. Farmer A will use the machine on 800 acres and Farmer B will use on 1000 acres. Farmer B has agreed to pay for all operating expenses and to rent out the machine to Farmer A on a per acre basis, based on costs. Each signs an agreement. At the end of the year, the following information has been recorded.
In this example, Farmer A has limited cash flow, while Farmer B is more solvent. Farmer A agrees to pay for 50% of the fixed cost, and thus to accept 50% ownership in the equipment, and to rent the equipment on a set per acre basis for those acres used during the year. The rental payment is designed to pay for the variable costs accessed during the year. At the end of the year, Farmer A pays Farmer B for his rental payments.