Blue Company owns a 7,420-acre tract of timber purchased in 2003 at a cost of $1
ID: 2410914 • Letter: B
Question
Blue Company owns a 7,420-acre tract of timber purchased in 2003 at a cost of $1,378 per acre. At the time of purchase, the land was estimated to have a value of $318 per acre without the timber. Blue Company has not logged this tract since it was purchased. In 2017, Blue had the timber cruised. The cruise (appraiser) estimated that each acre contained 8,480 board feet of timber. In 2017, Blue built 10 miles of roads at a cost of $8,310 per mile. After the roads were completed, Blue logged and sold 3,710 trees containing 901,000 board feet.
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Blue Company owns a 7,420-acre tract of timber purchased in 2003 at a cost of $1,378 per acre. At the time of purchase, the land was estimated to have a value of $318 per acre without the timber. Blue Company has not logged this tract since it was purchased. In 2017, Blue had the timber cruised. The cruise (appraiser) estimated that each acre contained 8,480 board feet of timber. In 2017, Blue built 10 miles of roads at a cost of $8,310 per mile. After the roads were completed, Blue logged and sold 3,710 trees containing 901,000 board feet.
Explanation / Answer
Part C:
Blue Plants should Capitalize the expenses of $ 74,200 (4*5*3710) and adjust the depletion the next time the timber is harvested.
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PartA Cost per Acre 1,378.00 Less: Cost per Acre without Timber 318.00 Cost per acre for Timber 1,060.00 Cost of Timber(1060*7420) 7,865,200.00 Depletion(7420*8480) 62,921,600.00 Depletion per Feet (7865200/62921600) 0.1250 Cost of timber sold(901000*.1250) 112,625.00Related Questions
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