Question

American Pulp Corporation (APC) has entered into a contract to harvest timber for $450,000. The total estimated available harvest is 150 million board-feet.

1. What is the depletion allowance for Years 1 to 3, if 42, 45 and 35 million board-feet are harvested by APC in those years?

2. After 3 years, the total available harvest for the original tract was reestimated at 180 million board-feet. Compute the depletion allowances for Years 4 and beyond.

Answer 1