Howton Paper Company purchased $1,400,000 of timberland in 2021 for its paper operations. Howton estimates that there are 10,000 hectares of timberland and it cut 2,000 hectares in 2022. The land is expected to have a residual value of $200,000 once all the timber is cut. Which of the following is true with regard to depletion? a.Depletion will cause Howton's timber inventory to increase. b.Howton will record depletion expense of $280,000 in 2022. c.Howton's depletion rate is $140 per hectare of timber. d.Howton should deplete the timber at a rate of 20% (2,000 hectares + 10,000 hectares) per year.
Howton Paper Company purchased $1,400,000 of timberland in 2021 for its paper operations. Howton estimates that there are 10,000 hectares of timberland and it cut 2,000 hectares in 2022. The land is expected to have a residual value of $200,000 once all the timber is cut. Which of the following is true with regard to depletion? a.Depletion will cause Howton's timber inventory to increase. b.Howton will record depletion expense of $280,000 in 2022. c.Howton's depletion rate is $140 per hectare of timber. d.Howton should deplete the timber at a rate of 20% (2,000 hectares + 10,000 hectares) per year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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16.
Howton Paper Company purchased $1,400,000 of timberland in 2021 for its paper operations. Howton estimates that there are 10,000 hectares of timberland and it cut 2,000 hectares in 2022. The land is expected to have a residual value of $200,000 once all the timber is cut. Which of the following is true with regard to depletion?
a.Depletion will cause Howton's timber inventory to increase.
b.Howton will record depletion expense of $280,000 in 2022.
c.Howton's depletion rate is $140 per hectare of timber.
d.Howton should deplete the timber at a rate of 20% (2,000 hectares + 10,000 hectares) per year.
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