11A company purchased a plot of land for $150,000 for the purposes of harvesting timber for resale. The company paid $10,000 to have the property boundaries marked by a land surveyor and estimates that itwill be able to sell the land for $60,000 after it harvests all the timber. The company believes it will harvest 50,000 board-feet of lumber from the land.Which amount of depletion expense should the company record if it harvested 6,000 board-feet of lumber during its first year of operations?$12,000$18,000$19,200$25,200

Step 1: Calculation of Total Depletable CostDepletable Cost = Land Purchase Price + Survey Cost -…

Answered: 11 A company purchased a plot of land…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

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Chapter11: Long-term Assets

Section: Chapter Questions

Problem 7PB: Tree Lovers Inc. purchased 2,500 acres of woodland in which it intends to harvest the complete...

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Tree Lovers Inc. purchased 100 acres of woodland in which the company intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $2,100,000 for the land. Tree Lovers will sell the lumber as it is harvested and expects to deplete it over five years (twenty acres in year one, thirty acres in year two, twenty-five acres in year three, fifteen acres in year four, and ten acres in year five). Calculate the depletion expense for the next five years and create the journal entry for year one.
Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for 120,000 miles. Montello uses the units-of-production depreciation method and in year one it expects to use the truck for 23,000 miles. Calculate the annual depreciation expense.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.
Utica Machinery Company purchases an asset for 1,200,000. After the machine has been used for 25,000 hours, the company expects to sell the asset for 150,000. What is the depreciation rate per hour based on activity?
Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.
Tree Lovers Inc. purchased 100 acres of woodland in which the company intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $2,600,000 for the land. Tree Lovers will sell the lumber as it is harvested and expects to deplete it over five years (20 acres in year one, 31 acres in year two, 23 acres in year three, 11 acres in year four, and 15 acres in year five). Calculate the depletion expense for the next five years. Year 1 Year 2 %$4 Year 3 Year 4 Year 5 Prepare the journal entry for year one. If an amount box does not reguire an entry, leave it blank. 00
Sequoia (S Corporation) purchased the rights to cut timber on several tracts of land over a 15-year period. It paid $500,000 for cutting rights. A timber engineer estimates that 250,000 board feet of timber will be cut. During the current year, Sequoia cut 45,000 board feet of timber, which it sold for $900,000. 8. Using cost depletion method, what is Sequoia's depletion deduction for the current year? Cost Depletion Cost basis in timber 13 500,000 Estimated feet of timber 250,000 (3 Per-unit cost depletion rate 2 (1)/(2) (4 Year 1 units sold 45,000 (5 Year 1 cost depletion (90,000) (3) x (4) 8b.) What is the gross margin on the sale of timber? (900,000-90,000)/900,000 = 0.9 Sc.) If Sequoia has one shareholder, whose individual marginal ordinary tax rate is 24% and dividend tax rate is 20%, what is the tax owed on the sale of the timber if the business has no other deductible expenses.
Brady Self Storage purchased land, paying $175,000 cash as a down payment and signing a $160,000 note payable for the balance. Brady also had to pay delinquent property tax of $1,000, title insurance costing $2,500, and $9,000 to level the land and remove an unwanted building. The company paid $51,000 to add soil for the foundation and then constructed an office building at a cost of $650,000. It also paid $55,000 for a fence around the property, $18,000 for the company sign near the property entrance, and $3,000 for lighting of the grounds.
Sequoia purchased the rights to cut timber on several tracts of land over a 15-year period. It paid $514,000 for cutting rights. A timber engineer estimates that 514,000 board feet of timber will be cut. During the current year, Sequoia cut 59,000 board feet of timber, which it sold for $914,000. What is Sequoia's cost depletion deduction for the current year?
Murphy Self Storage purchased land, paying $160,000 cash as a down payment and signing a $185,000 note payable for the balance. Murphy also had to pay delinquent property tax of $2,000, title insurance costing $6,000, and $11,000 to level the land and remove an unwanted building. The company paid $58,000 to add soil for the foundation and then constructed an office building at a cost of $700,000. It also paid $52,000 for a fence around the property, $11,000 for the company sign near the property entrance, and $3,000 for lighting of the grounds. Read the requirement. The cost of the land is The cost of the land improvements is The cost of the building is Requirement 1. What is the capitalized cost of each of Murphy's land, land improvements, and building? Print Done - X
At the beginning of 2021, 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, 2021. The cost of the roads, which have no residual value and no alternative use after the tract is cleared, was $240,000. During 2021, Terra logged 500,000 of the estimated five million board feet of timber.Required:Calculate the 2021 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 2021, Terra Lumber Company purchased a timber tract from Boise Cantor for $4,230,000. After the timber is cleared, the land will have a residual value of $690,000. Roads to enable logging operations were constructed and completed on March 30, 2021. The cost of the roads, which have no residual value and no alternative use after the tract is cleared, was $354,000. During 2021, Terra logged 590,000 of the estimated 5.9 million board feet of timber. Required:Calculate the 2021 depletion of the timber tract and depreciation of the logging roads assuming the units-of-production method is used for both assets.

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