#3 CH 11 NATURAL RESOURCES AND DEPLETION Conan Logging and Lumber Company is a private company...

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#3 CH 11 NATURAL RESOURCES AND DEPLETION Conan Logging and Lumber Company is a private company following ASPE owning 3,000 hectares of timberland on the north side of Mount Layman purchased in 2011 at a cost of $550 per hectare. In 2023, Conan began selectively logging this timber tract. However, in May 2023, Mount Layman erupted, knocking down all of Conan's timber and burying its timberland under 15 cm of ash. In addition, the logging roads, originally built at a cost of $150,000, were destroyed along with logging equipment having a book value of $300,000. At the time of eruption, Conan had logged 20% of the estimated 500,000 cubic meters of timber. Prior to the eruption, Conan estimated the land value at $200 per hectare after all timber had been harvested. Conan includes logging roads in the depletion base. Conan estimates it will take 3 years to salvage the downed timber at a cost of $700,000. The timber can be sold at an estimated price of $3 per cubic meter. The value of the land is unknown but is considered nominal due to future uncertainties. REQUIRED a) Determine depletion cost per cubic meter for the timber harvested prior to Mount Layman eruption. b) Prepare the depletion JE prior to eruption. c) Determine estimated loss before tax of timber (net of timber salvage), roads and machinery and how it should be reported in Conan's financial statements for year ended December 31, 2023. #3 CH 11 NATURAL RESOURCES AND DEPLETION Conan Logging and Lumber Company is a private company following ASPE owning 3,000 hectares of timberland on the north side of Mount Layman purchased in 2011 at a cost of $550 per hectare. In 2023, Conan began selectively logging this timber tract. However, in May 2023, Mount Layman erupted, knocking down all of Conan's timber and burying its timberland under 15 cm of ash. In addition, the logging roads, originally built at a cost of $150,000, were destroyed along with logging equipment having a book value of $300,000. At the time of eruption, Conan had logged 20% of the estimated 500,000 cubic meters of timber. Prior to the eruption, Conan estimated the land value at $200 per hectare after all timber had been harvested. Conan includes logging roads in the depletion base. Conan estimates it will take 3 years to salvage the downed timber at a cost of $700,000. The timber can be sold at an estimated price of $3 per cubic meter. The value of the land is unknown but is considered nominal due to future uncertainties. REQUIRED a) Determine depletion cost per cubic meter for the timber harvested prior to Mount Layman eruption. b) Prepare the depletion JE prior to eruption. c) Determine estimated loss before tax of timber (net of timber salvage), roads and machinery and how it should be reported in Conan's financial statements for year ended December 31, 2023.