Rachel Timber Inc., a small private company that follows ASPE, owns 9,000 hectares of timberland purchased in 2004 at a cost of $1,400 per hectare. At the time of purchase, the land without the timber was valued at $420 per hectare. In 2005, Rachel built fire lanes and roads, with a physical life of 30 years, at a cost of $84,000 and separately capitalized these costs. Every year, Rachel sprays to prevent disease at a cost of $3,000 per year and spends $7,000 to maintain the fire lanes and roads. During 2006, Rachel selectively logged and sold 700,000 cubic metres of the estimated 3.5 million cubic metres of timber. In 2007, Rachel planted new seedlings to replace the cut trees at a cost of $100,000.

Instructions

(a) Determine the depletion charge and the portion of depletion included in the cost of timber sold in 2006. Provide the journal entries to record the depletion charged to inventory (and subsequently to cost of goods sold) for the year.

(b) Rachel has not logged since 2006. Assume that Rachel logged 900,000 cubic metres of timber in 2017, of which 60% was sold in 2017 and the remainder sold in 2018. The timber cruiser (the appraiser) had estimated a total resource of 5 million cubic metres. Determine the cost of timber sold that relates to the depletion for 2017 and 2018. Provide the journal entries to account for the cost of timber produced in 2017 and subsequently sold in 2017 and 2018.

(c) How would Rachel account for the maintenance costs of the fire lanes and roads and the spraying of the timber- land?

(d) Discuss the depreciation methods that Rachel could use to depreciate the cost of the fire lanes and roads.

(e) Explain how your answers for parts (a) to (d) would differ if Rachel were a public company and followed IFRS.