Reference no: EM132601371
Question - Sailor Twift Inc. purchased 10,000 acres of a timber tract for $5,000 per acre on September 29th, 2020. The land without the timber was valued at $500 per acre. In order to begin using the timber tract, Sailor Twift needed to incur further expenditures to develop the timber tract of $50,000 in total. The company also pays $400 per month for routine maintenance of the timber tract. During 2020, the company's environmental specialist estimated that the timber tract contains 5,000,000 feet of timber. The company logged and sold 2,000,000 feet of timber during the year 2020. In 2021, Sailor Twift incurred $450,000 to plant new seedlings to replace the ones that had been cut down during 2020. The environmental specialist's assessment is that this expenditure would increase the estimate of timber by 1,500,000 feet. The company logged 1,000,000 feet of timber in 2021.
Instructions -
(1) Compute the amount of depletion for 2020.
(2) Compute the amount of depletion for 2021.
(3) If the company sold 1,000,000 feet of timber for $10,000 each in 2022, what is the value of timber inventory that should be reported in the company's balance sheet at December 31, 2022?
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