Chapter 17.II, Problem 7RE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Sequoia Timber Company purchased land containing an estimated 6,500,000 board feet of lumber for $3,700,000. The company invested another $300,000 to construct access roads and a company depot. The residual value of the property and equipment is estimated to be $880,000.

a. What is the average depletion cost per board foot of lumber?

b. If 782.000 board feet were cut in the second year of operation, what is the amount of the depletion cost for that year?

**(a)**

To determine

**To calculate:** The average depletion cost per board feet of lumber when the Sequoia Timber Company paid

Explanation

**Given Information:**

The Sequoia Timber Company paid

**Formula used:**

The average depletion cost per unit is

**Calculation:**

Consider Sequoia Timber Company paid

The total cost of resource is:

Now, consider the provided residual value of the property and equipment is

**(b)**

To determine

**To calculate:** The amount of depletion cost of second year when the Sequoia Timber Company paid

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