Question

Larkspur Company owns a 7,000-acre tract of timber purchased in 2006 at a cost of $1,417 per acre. At the time of purchase, the land was estimated to have a value of $317 per acre without the timber. Larkspur Company has not logged this tract since it was purchased. In 2020, Larkspur had the timber cruised. The cruise (appraiser) estimated that each acre contained 8,720 board feet of timber. In 2020, Larkspur built 10 miles of roads at a cost of $8,400 per mile. After the roads were completed, Larkspur logged and sold 3,815 trees containing 926,500 board feet. Determine the cost of timber sold related to depletion for 2020. (Round intermediate calculations to 5 decimal places, e.g. 1.24654 and final answer to 0 decimal places, e.g. 5,125.) Cost of timber sold LIMK то тект If Larkspur depreciates the logging roads on the basis of timber cut, determine the depreciation expense for 2020. (Round intermediate calculations to 5 decimal places, e.g. 1.24654 and final answer to o decimal places, e.g. 5,125.) Depreciation expense $ UNK то TEXT If Larkspur plants five seedlings at a cost of $4 per seedling for each tree cut, how should Larkspur treat the reforestation? Larkspur should the cost of

Answer 1

Ans: 1

Particulars	Amount($)
cost of timber @ (1417-317)*7,000	7,700,000
Depletion 7,000 acres* 8720	61,040,000
Depletion rate(7,700,000/61,040,000)	0.126
(total cost- salvage value)/total estimated unit available
cost of timber sold(0.126*926,500)	$ 116,739

2.

Particulars	Amount($)
Cost of road(10*8400)	$84,000
Depreciation(84000*926,500/61,040,000)	$1,275

3. Larkspur should Capitalize the cost of $76,300.

larkspur sold 3815 trees and will spend a total of $20 per tree cut ($4 x 5) to reforest the area. Thus 3815 x $20 = $76,300