Timber Resource Inc. is a forestry company. The company owns timber resources in northern Quebec. The company produces lumber from these resources. During 20X3, the company cut trees into logs with a fair market value of $ 600,000. The selling costs at the time of harvest were 5% of fair market value. At the end of the year, about 20% of these logs have not yet entered production. The 80% that have entered production required $ 175,000 of production costs to produce lumber into fixed cut lengths that are now available for sale to various customers. By the end of the year, 40% of the lumber was still on hand and ready for sale. There was no work- in- progress at the year- end. Fair value information for assets owned at the year- end is provided below:

Costs to sell are estimated to be 5% for timber, 5% for logs and 7% for lumber.

Required:

1. Prepare the journal entries to record the transactions during 20X3 as well as any entries needed to adjust year- end balances.

2. Show relevant balances in the SCI and SFP related to the transactions above.

Transcribed Image Text:

Logs $8,900,000 $110,000 $295,000 $9,350,000 $125,000 $310,000 Timber Lumber Fair value at end of 20X2 (before selling costs) Fair value at end of 20X3 (before selling costs)