Temple-Inland Corporation has negotiated the rights to cut timber on privately held forest acreage for $700,000. An estimated 350 million board feet of lumber are harvestable. Determine the depletion amount for the first 2 years if 15 million and 22 million board feet are removed.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Temple-Inland Corporation has negotiated the rights to cut timber on privately held forest acreage for $700,000. An estimated 350 million board feet of lumber are harvestable. Determine the depletion amount for the first 2 years if 15 million and 22 million board feet are removed.
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