1. At the beginning of 2021, Terra Lumber Company purchased a timber tract from Boise Cantor...

1. At the beginning of 2021, Terra Lumber Company purchased a timber tract from Boise Cantor for $4,200,000. After the timber is cleared, the land will have a residual value of $600,000. Roads to enable logging operations were constructed and completed on March 30, 2021. The cost of the roads, which have no residual value and no alternative use after the tract is cleared, was $240,000. During 2021, Terra logged 500,000 of the estimated five million board feet of timber.

Required:
Calculate the 2021 depletion of the timber tract and depreciation of the logging roads assuming the units-of-production method is used for both assets.

2. On January 2, 2021, David Corporation purchased a patent for $700,000. The remaining legal life is 12 years, but the company estimated that the patent will be useful only for eight years. In January 2023, the company incurred legal fees of $50,000 in successfully defending a patent infringement suit. The successful defense did not change the company’s estimate of useful life.

Required:
Prepare journal entries related to the patent for 2021, 2022, and 2023.

Expert Solution

ekkarill92 answered 2 years ago

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