Question: Conan Logging and Lumber Company a small private company that

Conan Logging and Lumber Company, a small private company that follows ASPE, owns 3,000 hectares of timberland on the north side of Mount Leno, which was purchased in 2002 at a cost of S550 per hectare. In 2014, Conan began selectively logging this timber tract. In May of 2014, Mount Lena erupted, burying Conan's timberland under 15 centimeters of ash. All of the timber on the Conan tract was downed. In addition, the logging roads, built at a cost of $150,000, were destroyed, as well as the Jogging equipment, with a carrying amount of $300,000.
At the time of the eruption, Conan had Jogged 20% of the estimated 500,000 cubic meters of timber. Prior to the eruption, Conan estimated the land to have a value of$200 per hectare after the timber was harvested. Conan includes the Jogging roads in the depletion base.
Conan estimates it will take three years to salvage the downed timber at a cost of $700,000. The timber can be sold for pulp wood at an estimated price of $3 per cubic meter. The value of the land is unknown, but must be considered nominal due to future uncertainties.
(a) Determine the depletion cost per cubic meter for the timber that was harvested prior to the eruption of Mount Leno.
(b) Prepare the journal entry to record the depletion before the eruption.
(c) Determine the amount of the estimated loss before income taxes and show how the losses of roads, machinery, and timber and the timber salvage value should be reported in Conan's financial statements for the year ended December 31, 2014.

Sale on SolutionInn
  • CreatedSeptember 18, 2015
  • Files Included
Post your question