*Problem 11-6 Sarasota Logging and Lumber Company owns 3,190 acres of timberland
ID: 2597293 • Letter: #
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*Problem 11-6 Sarasota Logging and Lumber Company owns 3,190 acres of timberland on the north side of Mount Leno, which was purchased in 2005 at a cost of $540 per acre. In 2017, Sarasota began selectively logging this timber tract. In May 2017, Mount Leno erupted, burying the timberland of Sarasota under a foot of ash. All of the timber on the Sarasota tract was downed. In addition, the logging roads, built at a cost of $136,500, were destroyed, as well as the logging equipment, with a net book value of $300,800. At the time of the eruption, Sarasota had logged 20% of the estimated 515,500 board feet of timber, prior to the eruption, Sarasota estimated the land to have a value of $220 per acre after the timber was harvested. Sarasota indludes the logging roads in the depletion base. Sarasota estimates it will take 3 years to salvage the downed timber at a cost of $656,600. The timber can be sold for pulp wood at an estimated price of $2 per board foot. The value of the land is unknown, but must be considered nominal due to future uncertainties. Determine the depletion cost per board foot for the timber harvested prior to the eruption of Mount Leno. (Round per unit answer to 2 decimal places, e.g. 0.45.) Depletion cost per board foot s Prepare the journal entry to record the depletion prior to the eruption. (f no entry is required, select "No entry" for the account titles and enter O for the amounts. Round per unit answer to 2 decimal places e.g. 0.45 for computational purpose and final answer to 0 decimal places, e.g. 45,892. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit If this tract represents approximately half of the timber holdings of Sarasota, determine the amount of the unusual loss due to the eruption of Mount Leno for the year ended December 31, 2017 Unusual loss due to the eruption of Mount Leno s Question Attempts: 0 of 4 usedExplanation / Answer
(a) Depletion cost per board foot for timber harvested prior to eruption of Mount Leno:
(b) Journal entry to record depletion prior to eruption
Journal Entry
(c) Calculation of unusual loss due to eruption:
$109,200
S.No. Particulars Formula / Working Amount (i) Original cost of the land 3190 acres @ $540 / acre $1,722,600 (ii) Dedcut Residual value of land 3190 acres @ $220 / acre $701,800 (iii) Loss in the value of land (i) - (ii) $1,020,800 (iv) Dedcut Cost of logging raods As provided $136,500 (v) Depletion base (iii) - (iv) $884,300 (vi) Estimated board feet of Timber As provided 515,500 (vii) Depletion per board foot (v) / (vi) $1.72Related Questions
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