Splish Company owns 9,000 acres of timberland purchased in 2006 at a cost of $1,
ID: 2589762 • Letter: S
Question
Splish Company owns 9,000 acres of timberland purchased in 2006 at a cost of $1,568 per acre. At the time of purchase, the land without the timber was valued at $448 per acre. In 2007, Splish built fire lanes and roads, with a life of 30 years, at a cost of $94,080. Every year, Splish sprays to prevent disease at a cost of $3,360 per year and spends $7,840 to maintain the fire lanes and roads. During 2008, Splish selectively logged and sold 784,000 board feet of timber, of the estimated 3,920,000 board feet. In 2009, Splish planted new seedlings to replace the trees cut at a cost of $112,000. Determine the depreciation expense and the cost of timber sold related to depletion for 2008. (Round intermediate calculations to 5 decimal places, e.g. 1.54687 and final answers to 0 decimal places, e.g. 5,125.)
Explanation / Answer
Answer : A) Depreciation expense = $3,136 per year
Depreciation expense = cost / life time
= 94,080/30years
= $3,136 per year
Depreciation expense = $3,136 per year
B) Cost of timber sold :$2,051,993
Cost of timber sold = $1,568-$448
= $1,120
= (1,120*9000acres)/3,920,000
= 10,080,000/3,920,000
= 2.57142*$784,000
= $2,015,993.28
Cost of timber sold =$2,051,993
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