Question: Forda Lumber Company owns a 7 000 acre tract of timber purchased

Forda Lumber Company owns a 7,000-acre tract of timber purchased in 2000 at a cost of $1,300 per acre. At the time of purchase, the land was estimated to have a value of $300 per acre without the timber. Forda Lumber Company has not logged this tract since it was purchased. In 2014, Forda had the timber cruised. The cruise (appraiser) estimated that each acre contained 8,000 board feet of timber. In 2014, Forda built 10 miles of roads at a cost of $7,840 per mile. After the roads were completed, Forda logged and sold 3,500 trees containing 850,000 board feet.

Instructions
(a) Determine the cost of timber sold related to depletion for 2014.
(b) If Forda depreciates the logging roads on the basis of timber cut, determine the depreciation expense for 2014.
(c) If Forda plants five seedlings at a cost of $4 per seedling for each tree cut, how should Forda treat the reforestation?


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  • CreatedJune 03, 2013
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