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 andexpects 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 1Year 2%$4Year 3Year 4Year 5Prepare the journal entry for year one. If an amount box does not reguire an entry, leave it blank.00

Depletion refers to an accrual accounting method used to determine the expense of extracting natural…

Answered: Tree Lovers Inc. purchased 100 acres of…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

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.
Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $15,000. Calculate yearly depreciation using the double-declining-balance method.
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 it expects to use the truck for 26,000 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.
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 $3,000,000 for the land. Tree Lovers will sell the lumber as it is harvested and expects to deplete it over five years (23 acres in year one, 30 acres in year two, 24 acres in year three, 10 acres in year four, and 13 acres in year five). Calculate the depletion expense for the next five years. Year 1 $ Year 2 Year 3 $ Year 4 Year 5 Prepare the journal entry for year one. If an amount box does not require an entry, leave it blank. %24 %24 %24 %24 %24
Bedox during the year purchased a coal mine for 2,000,000. It cost 500,000 to prepare the coal mine for the extraction of the coal. It was estimated that 750,000 tons of coal would be extracted from the mine during its useful life.. Bedox planned to sell the property for the amount of 100,000 at the end of its useful life. During the current year, 15,000 tons of coal were extracted and sold. What will be the depletion amount per ton for the current year?
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.
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?
Javlin Farms purchased three new tractors for $25,000 each. Javlin expects the tractors to have a useful life of 6 years and a residual value of $5,000. One of the tractors has not performed as expected, so Javlin sold the tractor after 2 years fir $18,000. Javlin sold the remaining tractors for $5,000 at the end of the 6 years. Javlin uses group depreciation on a straight-line basis. Required: a. Prepare the journal entry for the purchase. b. Prepare the journal entry for the first and second year's depreciation. c. Record the journal entry for the disposal of the tractor. d. Record the journal entry for the third year's depreciation
Pink Corp. purchased a piece of land in 2022 for $1,000,000 and incurred the following additional costs: cost of clear the land, $ 36,000; cost of paving a new parking lot, $48, 000; cost of lighting for the new parking lot, $24,000. In addition to these costs, Pink Corp was able to sell the timber from clearing the land for $7,000. How much should Pink record in the Land and Land Improvement accounts for this purchase? Select one: a. Land: $1,036,000; Land Improvements: $72, 000 b. Land: $993,000; Land Improvements: $108, 000 c. Land: $1, 103,000; Land Improvements: $0 d. Land: $1,000,000; Land Improvements: $ 108,000 e. Land: $1,029,000; Land Improvements: $72,000
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.
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

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