Question

Saskatchewan Forestry Company purchased a timber tract for $600,000 and estimates that it will be depleted evenly over its 10-year useful life with no residual value. Prepare the journal entry that would be recorded if 10 percent of the total timber is cut and placed into inventory during the current year.

Answer 1

Answer and Explanation:

The journal entry is given below:

Inventory (10% of $600,000) $60,000

         To Accumulated Depletion $60,000

(Being the 10% of the total timber cutted be recorded)

Here the inventory is debited as it increased the assets and credited the accumulated depletion as it decreased the assets