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04-04-12Class22 EndCh11 begin Ch 16 dilutive secb

# In2002hernandez

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Unformatted text preview: l estimated units available Units extracted x Cost per unit Chapter 18-39 = Depletion cost per unit = Depletion LO 6 Explain the accounting procedures for depletion of natural resources. Depletion Depletion E11-19 (Depletion Computations—Timber): Hernandez Timber Company owns 9,000 acres of timberland purchased in 1999 at a cost of \$1,400 per acre. At the time of purchase the land without the timber was valued at \$400 per acre. In 2000, Hernandez built fire lanes and roads, with a life of 30 years, at a cost of \$87,000. Every year Hernandez sprays to prevent disease at a cost of \$3,000 per year and spends \$7,000 to maintain the fire lanes and roads. During 2001, Hernandez selectively logged and sold 700,000 board feet of timber, of the estimated 3,000,000 board feet. In 2002, Hernandez planted new seedlings to replace the trees cut at a cost of \$100,000. Instructions: Determine the depreciation expense and the cost of timber sold related to depletion for 2001. Chapter 18-40 LO 6 Explain the accounting procedures for depletion of natural resources. Depletion Depletion E11-19 (Depletion Computations—Timber) De pr e c ia t io n Ex pe ns e : Fir e lane s and r o ad s Us e f ul lif e De p r e c iatio n e x p e ns e p e r ye ar Chapter 18-41 \$ 8 7 ,0 0 0 3 0 \$ 2 ,9 0 0 LO 6 Explain the accounting procedures for depletion of natural resources. Depletion Depletion E11-19 (Depletion Computations—Timber) De ple t io n: Co s t o f tim b e r land p e r ac r e Co s t o f land p e r ac r e Co s t o f tim b e r o nly p e r ac r e T o tal ac r e s Value o f tim b e r Es tim ate d to tal b o ar d f e e t Co s t p e r b o ar d f o o t Bo ar d f e e t o f tim b e r s o ld Co s t o f tim b e r s o ld r e late d to d e p le tio n Chapter 18-42 \$ 1,4 0 0 (4 0 0 ) \$ 1,0 0 0 9 ,0 0 0 \$ 9 ,0 0 0 ,0 0 0 3 ,0 0 0 ,0 0 0 \$ 3 .0 0 7 0 0 ,0 0 0 \$ 2 ,10 0 ,0 0 0 LO 6 Explain the accounting procedures for depletion of natural resources. Depletion Depletion Estimating Recoverable Reserves Same as accounting for changes in estimates. Revise the depletion rate on a prospective basis. Divides the remaining cost by the new estimate of the recoverable reserves. Chapter 18-43 LO 6 Explain the accounting procedures for depletion of natural resources. Depletion Depletion Continuing Controversy Oil and Gas Industry: Full cost concept Successful efforts concept Chapter 18-44 LO 6 Explain the accounting procedures for depletion of natural resources. Presentation and Analysis Presentation and Analysis Presentation of Property, Plant, Equipment, and Natural Resources Depreciating assets, use Accumulated Depreciation. Depleting assets may include use of Accumulated Depletion account, or the direct reduction of asset. Basis of valuation (cost) Pledges, liens, and other commitments Disclosures Depreciation expense for the period. Balances of major classes of depreciable assets. Accumulated depreciation. A description of the depreciation methods used. Chapter 18-45 LO 7 Explain how to report and analyze property, LO plant, equipment, and natural resources. plant, Presentation and Analysis Presentation and Analysis The analyst...
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