Luann and Ella Fredricks are sisters who inherited 20 acres on Feb 22, 20x1 of land. The land had been purchased by their great uncle for $200,000, and their neighbor offered to purchase it from them for $400,000. They declined to sell, deciding to turn it into an orchard, called Luella Orchards.

On May 1, 20x1, Luella purchased and planted rootstock (grafted seedlings) for 5 edible apple varietals. These varietals produce edible fruit after 3 full years of planting the seedlings. Because apple trees are not self-pollinating, Luella also planted ornamental crab apple trees as neighboring trees. They planted a total of 100 trees per acre, half to produce apples and half for pollination purposes. The cost of the trees was $20/tree for the first 100 trees and $15/tree for each additional tree, with a flat fee of $20,000 in transportation costs. The trees are required to sit in their pots to acclimate to their new climate for one month. On June 1, 20x1, Luella paid $50,000 in labor and machine rental costs for the initial planting.

Newly planted trees require weekly watering from June to September. The cost of watering is $10,000 for the entire orchard in years 1-3 and drops to $5,000 per year once the trees are well established.

In the first 5 years of production (years 4-8), the trees are expected to produce 400 fruits per tree; after 5 years, production is expected to increase to 800 fruits per tree. Apple trees may live for a total of 80 years, but rarely produce consumable fruit after their 50^th year.

At the end of year 1, the value in the rootstock account, net of accumulated depreciation is:

108,290

110,500

130,500

127,890

At the end of year 3, the value in the rootstock account, net of accumulated depreciation is:

103,870

110,500

130,500

122,670