Saskatchewan Forestry Company purchased a timber tract for $225,000 and estimates that it will be depleted evenly over its 10-year useful life with no residual value. Prepare the journal entry that would be recorded if 10 percent of the total timber is cut and placed into inventory during the current year

Question

Business

Atticus Sweeney

Today, 08:35

Saskatchewan Forestry Company purchased a timber tract for $225,000 and estimates that it will be depleted evenly over its 10-year useful life with no residual value. Prepare the journal entry that would be recorded if 10 percent of the total timber is cut and placed into inventory during the current year

+2

Answers (1)

Know the Answer?

Genesis Stephens · Answer 1

generally you need to determine the cost per unit, but in this case you are given a percentage of depletion = 10% x $225,000 = $22,500 which determines the inventory value (or depletion expense if the timber is sold) during the year.

the journal entry should be:

December 31, 20xx

Dr Timber inventory 22,500

Cr Accumulated depletion - timber tract 22,500