Chapter 10 - Problem #10

Markov Corporation owns forests that are harvested with the wood sold to papermaking companies. Markov purchases a new tract of forest on January 1, Year One, for $360,000. Company officials estimate that 4,000 tons of wood can be harvested from the forest and sold. After that, the land will be worth about $20,000.

In Year One, 2,500 tons of wood are harvested, and 2,200 are sold for $120 per ton. Make any necessary journal entries.

In Year Two, the remaining 1,500 tons of wood are harvested, and then 1,800 tons are sold for $120 per ton. Make any necessary journal entries.

Problem #15

The Monster Cookie Company buys a machine to make cookies on January 1, Year One. It costs $500,000 but has a $100,000 residual value and an expected life of ten years. Straight-line depreciation is to be applied. On January 1, Year Three, the company makes two changes to this machine. First, $30,000 is spent to add an attachment so that the company can make two types of cookies rather than just one. Second, the company spends $40,000 so that the machine will last five years longer than originally anticipated.

In connection with this machine, what figures are reported on the companys financial statements for Year Three?