Forda Lumber Company owns a 13,580-acre tract of timber purchased in 2007 at a c
ID: 2464666 • Letter: F
Question
Forda Lumber Company owns a 13,580-acre tract of timber purchased in 2007 at a cost of $2,522 per acre. At the time of purchase, the land was estimated to have a value of $582 per acre without the timber. Forda Lumber Company has not logged this tract since it was purchased. In 2014, Forda had the timber cruised. The cruise (appraiser) estimated that each acre contained 15,520 board feet of timber. In 2014, Forda built 10 miles of roads at a cost of $15,210 per mile. After the roads were completed, Forda logged and sold 6,790 trees containing 1,649,000 board feet.
a) Determine the cost of timber sold related to depletion for 2014. (Round answer to 0 decimal places, e.g. 1525.)
b) If Forda depreciates the logging roads on the basis of timber cut, determine the depreciation expense for 2014. (Round answer to 0 decimal places, e.g. 1525.)
c) If Forda plants five seedlings at a cost of $8 per seedling for each tree cut, how should Forda treat the reforestation?
Explanation / Answer
Ans a Cost per acre per timber $2522-582 1940 Cost of timber sold related to depletion 1940*13580 acres 26345200 Total Board Feet acres Denominator= 15520*13580 210761600 Total Board feet 1649000 Depletion 26345200/210761600*1649000 206125 Ans a Ans b Logging road=$15210*10 152100 Depreciation on logging road 152100/210761600*1649000 $1190 Ans Ans c Ford should capitalize the cost of $ 6790*$8*5 271600 Ans