Stanislaw Timber Company owns 9,000 acres of timberland purchased in 2003 at a c

Question

Stanislaw Timber Company owns 9,000 acres of timberland purchased in 2003 at a cost of $2,772 per acre. At the time of purchase, the land without the timber was valued at $792 per acre. In 2004, Stanislaw built fire lanes and roads, with a life of 30 years, at a cost of $166,320. Every year, Stanislaw sprays to prevent disease at a cost of $5,940 per year and spends $13,860 to maintain the fire lanes and roads. During 2005, Stanislaw selectively logged and sold 1,386,000 board feet of timber, of the estimated 6,930,000 board feet. In 2006, Stanislaw planted new seedlings to replace the trees cut at a cost of $198,000.

Determine the depreciation expense and the cost of timber sold related to depletion for 2005.

Explanation / Answer

fire lanes & road = 166320 $

life = 30 years

depreciation = 166320 / 30 = 5544 $

COST OF TIMBER SOLD

value of TIMBER = 17820000 $ (9000 * (2772-792 )

Estimated board feet = 6930000

cost of timber sold = 17820000 / 6930000 * 1386000 = 3564000

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