Reference no: EM132616147

Question - Shamrock Timber Inc., a small private company that follows ASPE, owns 16,000 hectares of timberland purchased in 2013 at a cost of $1,200 per hectare. At the time of purchase, the land without the timber was valued at $500 per hectare. In 2014

Shamrock built fire lanes and roads, with a physical life of 30 years, at a cost of $84,000 and separately capitalized these costs. Every year, Shamrock sprays to prevent disease at a cost of $4,000 per year and spends $10,000 to maintain the fire lanes and roads.

During 2015, Shamrock selectively logged and sold 700,000 cubic metres of the estimated 3.50 million cubic metres of timber. In 2016, Shamrock planted new seedlings to replace the cut trees at a cost of $200,000.

Required -

a) Determine the depletion charge and the portion of depletion included in the cost of timber sold in 2015.

b) Provide the journal entries to record the depletion charged to inventory (and subsequently to cost of goods sold) for the year.

c) Shamrock has not logged since 2015. Assume that Shamrock logged 820,000 cubic metres of timber in 2017, of which 60% was sold in 2017 and the remainder sold in 2018. The timber cruiser (the appraiser) had estimated a total resource of 8 million cubic metres. Determine the cost of timber sold that relates to the depletion for 2017 and 2018.

Provide the journal entries to account for the cost of timber produced in 2017 and subsequently sold in 2017 and 2018.

d) Prepare the necessary journal entry to show how would Shamrock account for the maintenance costs of the fire lanes and roads and the spraying of the timberland.