apter 11-2 i At the cleared, the land will have a residual value of $630,000. Ro

Question

apter 11-2 i At the cleared, the land will have a residual value of $630,000. Roads to enable logging operations were constructed and completed on March 30, 2018. The cost of the roads, which have no residual value and no alternative use after the tract is cleared, was $265,000. During 2018, Terra logged 530,000 of the estimated 5.3 million board feet of timber beginning of 2018, Terra Lumber Company purchased a timber tract from Boise Cantor for $3,810,000. After the timber is Required: Calculate the 2018 depletion of the timber tract and depreciation of the logging roads assuming the units-of-production methodis used for both assets. (Do not round intermediate calculations.) Depletion of the timber tract Depreciation of the logging roads

Explanation / Answer

1. Computation of Depletion of timber tract

1. Depletion of timber tract = (Total Timber tract Cost - Land Residual Value) * Timber Logged / Total Timber

Depletion of timber tract = (3810000 - 630000) * 530000 / 5300000 = $318000

2. Depreciation of Logging Roads = (Cost - Residual Value) * Timber Logged / Total Timber

Depreciation of Logging Roads = (265000 - 0) * 530000 / 5300000

Depreciation of Logging Roads = $26500

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