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 1 year ago

On February 12,2021,Harvest Incorporated purchased the right to remove timber from a 13,000-acre tract of land...

On February 12,2021,Harvest Incorporated purchased the right to remove timber from a 13,000-acre tract of land over the next four years,and the company estimates no residual value.The timber is to be sold as lumber for new homeonstruction. The cost of the timber rights was$312,000,with estimated salable timber feet of 780,000.During 2021 and 2022,Harvest harvested and sold.600,000 feet of timber.What is the book value of the timber rights at the end of 2022,assuming the company uses the units-of- production method?

Timber Resource Inc., a forestry company, owns timber resources in northern Quebec. The company produces lumber...

Timber Resource Inc., a forestry 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 estimated at the time were 5% of fair 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...

A company purchased equipment at the beginning of 2021 for $500,000. The equipment is depreciated on...

A company purchased equipment at the beginning of 2021 for $500,000. The equipment is depreciated on a straight-line basis with an estimated useful life of nine years and a $50,000 residual value. At the beginning of 2024, the company revised the equipment’s useful life to a total of seven years (four more years) because of changing customer demand. The company also revised the expected residual value to $30,000. What depreciation expense would the company record for the year 2024 on...

One timber company claims that the amount of usable lumber in the trees being harvested in...

One timber company claims that the amount of usable lumber in the trees being harvested in ClearCut is approximately normally distributed, with a mean of 256 cubic feet per tree and a standard deviation of 42 cubic feet. a) What is the probability that the amount of usable lumber in a randomly selected tree is less than 250 cubic feet? b) If a decision is made not to harvest the smallest 20% of the trees, they will be harvested when...

The consolidated balance sheets for Lloyd Lumber Company at the beginning and end of the year...

The consolidated balance sheets for Lloyd Lumber Company at the beginning and end of the year follow. The company bought $50 million worth of fixed assets. The charge for depreciation during the year was $10 million. Net income was $33 million, and the company paid out $5 million in dividends. Lloyd Lumber Company: Balance Sheets at Beginning and End of the year ($ million) Jan. 1 Dec. 31 Cash $ 7 $ 5 Marketable securities 0 ...

On July 15, 2021, the Nixon Car Company purchased 1,500 tires from the Harwell Company for...

On July 15, 2021, the Nixon Car Company purchased 1,500 tires from the Harwell Company for $46 each. The terms of the sale were 3/10, n/30. Nixon uses a perpetual inventory system and the gross method of accounting for purchase discounts. Required: 1. Prepare the journal entries to record the purchase on July 15 and payment on July 23, 2021. 2. Prepare the journal entry for the payment, assuming instead that it was made on August 15, 2021.

1.On June 30, 2021, the Johnstone Company purchased equipment from Genovese Corp. Johnstone agreed to pay...

1.On June 30, 2021, the Johnstone Company purchased equipment from Genovese Corp. Johnstone agreed to pay Genovese $20,000 on the purchase date and the balance in five annual installments of $8,000 on each June 30 beginning June 30, 2022. Assuming that an interest rate of 10% properly reflects the time value of money in this situation, at what amount should Johnstone value the equipment? 2. Johnstone needs to accumulate sufficient funds to pay a $500,000 debt that comes due on...

On January 1, 2021, Cullumber Company, a public company, purchased 30% of the common shares of...

On January 1, 2021, Cullumber Company, a public company, purchased 30% of the common shares of Triple Titanium Inc. for $500,000. The remaining shares (70%) are held by the family members of the company’s founder. Cullumber considers this a strategic investment and a critical step into developing consumer markets. Triple Titanium is currently a supplier to Cullumber. Cullumber placed two members on the 10-person board of directors of Triple Titanium and the two members believe they have been influential on...

On January 1, 2021, Wildcat Company purchased $93,000 of 10% bonds at discount.

On January 1, 2021, Wildcat Company purchased $93,000 of 10% bonds at discount. The market interest rate is 12%. The bonds are to be held-to-maturity, and will last for 3 years. The bonds pay interest semiannually on January 1 and July 1.Required: (1.) Prepare the appropriate journal entry to record the acquisition of the bonds. (2.) Record the first two interest payments.

On January 1, 2021, the Excel Delivery Company purchased a delivery van for $46,000. At the...

On January 1, 2021, the Excel Delivery Company purchased a delivery van for $46,000. At the end of its five-year service life, it is estimated that the van will be worth $4,000. During the five-year period, the company expects to drive the van 165,000 miles. Required: Calculate annual depreciation for the five-year life of the van using each of the following methods. rev: 05_15_2019_QC_CS-168776, 11_22_2019_QC_CS-191707 Exercise 11-1 (Algo) Part 1 1. Straight line. 2. Double-declining balance. (Round your answers to...

Question