Teal Company owns 9,000 acres of timberland purchased in 2006 at a cost of $1,66
ID: 2557554 • Letter: T
Question
Teal Company owns 9,000 acres of timberland purchased in 2006 at a cost of $1,666 per acre. At the time of purchase, the land without the timber was valued at $476 per acre. In 2007, Teal built fire lanes and roads, with a life of 30 years, at a cost of $99,960. Every year, Teal sprays to prevent disease at a cost of $3,570 per year and spends $8,330 to maintain the fire lanes and roads. During 2008, Teal selectively logged and sold 833,000 board feet of timber, of the estimated 4,165,000 board feet. In 2009, Teal planted new seedlings to replace the trees cut at a cost of $119,000.
Teal Company owns 9,000 acres of timberland purchased in 2006 at a cost of $1,666 per acre. At the time of purchase, the land without the timber was valued at $476 per acre. In 2007, Teal built fire lanes and roads, with a life of 30 years, at a cost of $99,960. Every year, Teal sprays to prevent disease at a cost of $3,570 per year and spends $8,330 to maintain the fire lanes and roads. During 2008, Teal selectively logged and sold 833,000 board feet of timber, of the estimated 4,165,000 board feet. In 2009, Teal planted new seedlings to replace the trees cut at a cost of $119,000.
Explanation / Answer
Cost of timber : 1666 -476cost of land = 1190
Total cost of timber : 1190 * 9000 = 10,710,000
Cost of goods sold to depletion : cost of timber * timber depleted /total estimated timber depletion
10,710,000*833,000 / 4,165,000
= $ 2,142,000
Depreciation expense =cost of fire land and roads /useful life
= 99960/30
=$ 3332
b)Estimated revised value of timber : 10,710,000- 2,142,000 + 119,000 = 8687000
Cost of timber sold : 8687000* 1071000/5950000
= $ 1563660
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