. Markov Corporation owns forests that are harvested with the wood sold to paper

Question

. Markov Corporation owns forests that are harvested with the wood sold to papermaking companies. Markov purchases a new tract of forest on January 1, Year One, for $360,000. Company officials estimate that 4,000 tons of wood can be harvested from the forest and sold. After that, the land will be worth about $20,000. a. In Year One, 2,500 tons of wood are harvested, and 2,200 are sold for $120 per ton. Make any necessary journal entries. b. In Year Two, the remaining 1,500 tons of wood are harvested, and then 1,800 tons are sold for $120 per ton. Make any necessary journal entries.

Explanation / Answer

Year Harvesting Sales Value Book Value Inventory Qty Value Qty Value Qty Value 0         4,000 3,60,000 1              2,500 2,12,500 2200 264000         1,500 1,47,500            300      25,500 2              1,500 1,27,500 1800 216000                -        20,000 Calculation of Rate per ton Purchase cost        3,60,000 Less: Salavage value            20,000 Net cost        3,40,000 Qty in Forest              4,000 Rate per ton                    85 Year 1 Purchase Date Account Title Debit Credit 1-Jan Forest        3,60,000 Cash 3,60,000 Depletion Date Account Title Debit Credit 31-Dec Depletion        1,87,000 Wood Inventory            25,500 Accumulated Depletion 2,12,500 Sales Date Account Title Debit Credit 31-Dec Cash        2,64,000 Sales 2,64,000 Year 2 Depletion Date Account Title Debit Credit 31-Dec Depletion        1,53,000 Wood Inventory      25,500 Accumulated Depletion 1,27,500 Sales Date Account Title Debit Credit 31-Dec Cash        2,16,000 Sales 2,16,000 Sale of Land Date Account Title Debit Credit 31-Dec Cash            20,000 Sales      20,000

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