The apple ming co. on may 31, 2014, acquired the rights to a coal mine containing an estimated reserves of 1, 000,000 tons of coal. The company estimated that 12, 500 tons of coal would be extracted and sold each month. Cost allocable to coal was 3,500,000
The apple ming co. on may 31, 2014, acquired the rights to a coal mine containing an estimated reserves of 1, 000,000 tons of coal. The company estimated that 12, 500 tons of coal would be extracted and sold each month. Cost allocable to coal was 3,500,000
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3. Miller Mining, a calendar-year corporation,purchased the rights to a copper mine on July 1, Year 1. Of thetotal purchase price, $2.8 million was appropriately allocable tothe copper. Estimated reserves were 800,000 tons of copper. Millerexpects to extract and sell 10,000 tons of copper per month.Production began immediately. The selling price is $25 per ton.Miller uses percentage depletion (15%) for tax purposes. To aidproduction, Miller also purchased some new equipment on July 1,Year 1. The equipment cost $76,000 and had an estimated useful lifeof 8 years. After all the copper is removed from this mine,however, the equipment will be of no use to Miller and will be soldfor an estimated $4,000. If sales and production conform toexpectations, what is Millerâs depreciation expense on the newequipment for financial accounting purposes for the Year 1 calendaryear? | |||||||||||||||||||||||||||||||||
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In 2016, the Marion Company purchased land containing a mineralmine for $1,790,000. Additional costs of $776,000 were incurred todevelop the mine. Geologists estimated that 350,000 tons of orewould be extracted. After the ore is removed, the land will have aresale value of $116,000. |
To aid in the extraction, Marionbuilt various structures and small storage buildings on the site ata cost of $196,000. These structures have a useful life of 10years. The structures cannot be moved after the ore has beenremoved and will be left at the site. In addition, new equipmentcosting $99,000 was purchased and installed at the site. Mariondoes not plan to move the equipment to another site, but estimatesthat it can be sold at auction for $4,500 after the mining projectis completed. |
In 2016, 69,000 tons of ore wereextracted and sold. In 2017, the estimate of total tons of ore inthe mine was revised from 350,000 to 462,400. During 2017, 78,000tons were extracted. |
| Required: |
| 1. | Compute depletion and depreciation of the mine and the miningfacilities and equipment for 2016 and 2017. Marion uses theunits-of-production method to determine depreciation on miningfacilities and equipment. (Round the intermediatecalculation to 3 decimal places.) |
