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Problem 11-07 Vaughn Paper Products purchased 11,500 acres of forested timberland in March 2020. The company paid $1,955 per

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Answer #1

Depreciation according to straight line method = (cost of asset - salvage value)/no of years

depreciation under slim would be same for 2020,2021,2022

depreciation = (258750 - 10350)/15 = 16560 each year

Depletion expenses is expenses for use of natural resources according to units extracted out of it. It will include other maintainence expenses on it.it is given that roads are used for logging and will be included under depletion expense hence,we will include it.

depletion expenses =( cost of land + expenses )/ no of estimated units x no of. Units produced

depletion expenses = cost of land = 11500 acres x 1955/acre = 22482500 + cost of road (287500) =22770000

estimated board feet available =7762500

depletion expenses per board feet = 22770000/7762500 = 2.93333

Board feet cut in year 2020 = 621000

depetion expenses for 2020 = 621000 x 2.93333 = 1821598

Annual cost will not be included in depletion expenses

so for 2021 depletion expenses is 22770000/7417500 x 890100 = 2732400

for 2022 = 22770000/7475000 x 747500 = 2277000

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Answer #2

In reference to the previous answer, the depreciation for the first year would be different than the subsequent years as the asset was purchased mid-year (in March).

You would add the cost of replanting when calculating the depletion base each year as well.

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