At the beginning of 2016, Terra Lumber Company purchased a timber tract from Boise Cantor for $3,200,000. After the timber is cleared, the land will have a residual value of $600,000. Roads to enable logging operations were constructed and completed on March 30, 2016. The cost of the roads, which have no residual value and no alternative use after the tract is cleared, was $240,000. During 2016, Terra logged 500,000 of the estimated five million board feet of timber. Required: Calculate the 2016 depletion of the timber tract and depreciation of the logging roads assuming the units-ofproduction method is used for both assets.
At the beginning of 2016, Terra Lumber Company purchased a timber tract from Boise Cantor for $3,200,000. After the timber is cleared, the land will have a residual value of $600,000. Roads to enable logging operations were constructed and completed on March 30, 2016. The cost of the roads, which have no residual value and no alternative use after the tract is cleared, was $240,000. During 2016, Terra logged 500,000 of the estimated five million board feet of timber. Required: Calculate the 2016 depletion of the timber tract and depreciation of the logging roads assuming the units-ofproduction method is used for both assets.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At the beginning of 2016, Terra Lumber Company purchased a timber tract from Boise Cantor for $3,200,000. After the timber is cleared, the land will have a residual value of $600,000. Roads to enable logging operations were constructed and completed on March 30, 2016. The cost of the roads, which have no residual value and no alternative use after the tract is cleared, was $240,000. During 2016, Terra logged 500,000 of the estimated five million board feet of timber. Required: Calculate the 2016 depletion of the timber tract and
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