Calculating Book Value of Timber Rights Using Units-of-Production Method

What is the book value of the timber rights at the end of 2025?

The book value of the timber rights at the end of 2025, assuming the company uses the units-of-production method, is $48,000.

Answer:

The book value of the timber rights at the end of 2025, assuming the company uses the units-of-production method, is $48,000.

To calculate the book value, we first need to determine the depletion rate per foot of timber. The depletion rate is calculated by dividing the cost of the timber rights by the estimated salable timber feet: $240,000 / 750,000 feet = $0.32 per foot.

Next, we calculate the total depletion for the timber sold during 2024 and 2025: 600,000 feet * $0.32 per foot = $192,000.

Finally, we subtract the total depletion from the initial cost of the timber rights: $240,000 - $192,000 = $48,000. This represents the remaining book value of the timber rights at the end of 2025.