Amortization and Depletion Entries Data related to the acquisition of timber rig

Question

Amortization and Depletion Entries

Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:

Timber rights on a tract of land were purchased for $480,000 on February 22. The stand of timber is estimated at 3,000,000 board feet. During the current year, 800,000 board feet of timber were cut and sold.

On December 31, the company determined that $800,000 of goodwill was impaired.

Governmental and legal costs of $3,840,000 were incurred on April 3 in obtaining a patent with an estimated economic life of 15 years. Amortization is to be for three-fourths of a year.

Required:

1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items. Do not round your intermediate calculation.

2. Journalize the adjusting entries required to record the amortization, depletion, or impairment for each item.

Item Impairment, Amortization or Depletion Expense a. $ b. $ c. $

Explanation / Answer

1.

note:

depletion cost = purchase price / total output * output drawn during the year.

amortization cost = purchase price / life * 3/4..............(since it is mentioned that amortization is for 3/4ths of the year).

2.a.

Item Impairment, Amortization or Depletion expense working a. $128,000 depletion cost. depletion cost = $480,000 / 3,000,000* 800,000 =>$128,000 b. $800,000 impairment cost readily given c. $192,000 amortization ($3,840,000/15 years) *3/4 =>$192,000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.