Tree Lovers Inc. purchased 100 acres of woodland in which the company intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $2,100,000 for the land. Tree Lovers will sell the lumber as it is harvested and expects to deplete it over five years (twenty acres in year one, thirty acres in year two, twenty-five acres in year three, fifteen acres in year four, and ten acres in year five). Calculate the depletion expense for the next five years and create the
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- Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $15,000. Calculate yearly depreciation using the double-declining-balance method.arrow_forwardMontello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one it expects to use the truck for 26,000 miles. Calculate the annual depreciation expense.arrow_forwardMontello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.arrow_forward
- Sequoia purchased the rights to cut timber on several tracts of land over a 15-year period. It paid $514,000 for cutting rights. A timber engineer estimates that 514,000 board feet of timber will be cut. During the current year, Sequoia cut 59,000 board feet of timber, which it sold for $914,000. What is Sequoia's cost depletion deduction for the current year?arrow_forwardA company purchased a new forging machine to manufacture disks for airplane turbine engines. The new press costs $3,800,000, and it falls into the seven-year MACRS property class. The company has to pay property taxes to the local township for ownership of this forging machine at a rate of 1.2% on the beginning book value of each year.(a) Determine the book value of the asset at the beginning of each tax year.(b) Determine the amount of property taxes over the machine's depreciable life.arrow_forwardJavlin Farms purchased three new tractors for $25,000 each. Javlin expects the tractors to have a useful life of 6 years and a residual value of $5,000. One of the tractors has not performed as expected, so Javlin sold the tractor after 2 years fir $18,000. Javlin sold the remaining tractors for $5,000 at the end of the 6 years. Javlin uses group depreciation on a straight-line basis. Required: a. Prepare the journal entry for the purchase. b. Prepare the journal entry for the first and second year's depreciation. c. Record the journal entry for the disposal of the tractor. d. Record the journal entry for the third year's depreciationarrow_forward
- Sequoia (S Corporation) purchased the rights to cut timber on several tracts of land over a 15-year period. It paid $500,000 for cutting rights. A timber engineer estimates that 250,000 board feet of timber will be cut. During the current year, Sequoia cut 45,000 board feet of timber, which it sold for $900,000. 8. Using cost depletion method, what is Sequoia's depletion deduction for the current year? Cost Depletion Cost basis in timber 13 500,000 Estimated feet of timber 250,000 (3 Per-unit cost depletion rate 2 (1)/(2) (4 Year 1 units sold 45,000 (5 Year 1 cost depletion (90,000) (3) x (4) 8b.) What is the gross margin on the sale of timber? (900,000-90,000)/900,000 = 0.9 Sc.) If Sequoia has one shareholder, whose individual marginal ordinary tax rate is 24% and dividend tax rate is 20%, what is the tax owed on the sale of the timber if the business has no other deductible expenses.arrow_forwardBrady Self Storage purchased land, paying $175,000 cash as a down payment and signing a $160,000 note payable for the balance. Brady also had to pay delinquent property tax of $1,000, title insurance costing $2,500, and $9,000 to level the land and remove an unwanted building. The company paid $51,000 to add soil for the foundation and then constructed an office building at a cost of $650,000. It also paid $55,000 for a fence around the property, $18,000 for the company sign near the property entrance, and $3,000 for lighting of the grounds.arrow_forwardMurphy Self Storage purchased land, paying $160,000 cash as a down payment and signing a $185,000 note payable for the balance. Murphy also had to pay delinquent property tax of $2,000, title insurance costing $6,000, and $11,000 to level the land and remove an unwanted building. The company paid $58,000 to add soil for the foundation and then constructed an office building at a cost of $700,000. It also paid $52,000 for a fence around the property, $11,000 for the company sign near the property entrance, and $3,000 for lighting of the grounds. Read the requirement. The cost of the land is The cost of the land improvements is The cost of the building is Requirement 1. What is the capitalized cost of each of Murphy's land, land improvements, and building? Print Done - Xarrow_forward
- On March 1, 2020, Pina Colada Corp. acquired real estate on which it planned to construct a small office building. The company paid $88,000 in cash. An old warehouse on the property was razed at a cost of $9,000; the salvaged materials were sold for $2,700. Additional expenditures before construction began included $1,400 attorney’s fee for work concerning the land purchase, $5,600 real estate broker’s fee, $7,600 architect’s fee, and $13,300 to put in driveways and a parking lot.(a)Determine the amount to be reported as the cost of the land. Cost of land $arrow_forwardBerry purchased a building (including land) for $711,000. Berry plans to use the building. The land’s value on the purchase date was $159,000, and the building’s value was $552,000. Berry gave a cash down payment of 20% of the total purchase cost and signed a promissory note for the remainder. The company estimates the building will have a useful life of 25 years and a salvage value of $81,000. What is the journal entry for this?arrow_forwardWake Coffee Co. has a piece of equipment no longer needed for production. The company purchased the equipment for $75,000 and has accumulated depreciation of $10,000 related to the equipment. Wake Coffee Co. has determined it can either lease the equipment for the next ten years, for yearly revenues of $9,000, or sell the equipment for $70,000. If leased, the company expects to incur repairs and other expenses of $22,000 over the life of the lease. The equipment would also have a $3,500 salvage value. If sold, the broker requires a 4% broker commission. Prepare a differential analysis to determine if the company should sell (Alternative 1) or lease (Alternative 2) the equipment.arrow_forward
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