Question

In 2021, the Marion Company purchased land containing a mineral mine for $1,740,000. Additional costs of $676,000 were incurred to develop the mine. Geologists estimated that 400,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $116,000. To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $184,000. These structures have a useful life of 10 years. The structures cannot be moved after the ore has been removed and will be left at the site. In addition, new equipment costing $96,000 was purchased and installed at the site. Marion does not plan to move the equipment to another site, but estimates that it can be sold at auction for $4,000 after the mining project is completed. In 2021, 60,000 tons of ore were extracted and sold. In 2022, the estimate of total tons of ore in the mine was revised from 400,000 to 451,000. During 2022, 96,000 tons were extracted. Required: 1. Compute depletion and depreciation of the mine and the mining facilities and equipment for 2021 and 2022. Marion uses the units- of-production method to determine depreciation on mining facilities and equipment. 2. Compute the book value of the mineral mine, structures, and equipment as of December 31, 2022. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute depletion and depreciation of the mine and the mining facilities and equipment for 2021 and 2022. Marion uses the units-of-production method to determine depreciation on mining facilities and equipment. (Do not round intermediate calculations.) 2022 2021 345,000 $ Depletion Depreciation for Structures Depreciation for Equipment

Answer 1

Mine Purchase price of Mine Additional Costs Total Value of Mine $ 17,40,000.00 $ 6,76,000.00 $24,16,000.00 Resale Value Estimated extraction Extraction during 2021 $ 1,16,000.00 4,00,000 tons 60,000 tons Depreciation (units of Prod method) Dep (2021) Cost - Residual value x Extraction during year Total estimated extraction ($2416000 - $116000) x 60000 400000 $2300000 x 60000 / 400000 $ 3,45,000.00 In 2022, Estimated extraction revised to 451000 units Extraction during 2022 96,000 tons Dep (2022) ($2416000 - $116000-$345000) x 96000 451000-40000 $1955000 x 96000 / 391000 $ 4,80,000.00 Structure Structure's Value Useful life $ 1,84,000.00 10 years Depreciation On Structur (for 2021 and 2022) $184000 / 10 years $ 18,400.00 per year

Equipment Cost of Equipment Residual Value Dep (2021) - 96,000.00 4,000.00 ($96000 - $4000) x 60000 400000 13,800.00 S Dep (2022) ($96000 - $4000-$13800) x 96000 451000-60000 19,200.00 = $ Computation of Book Values Mineral Mine Structures Costs $ 24,16,000.00 $ 1,84,000.00 less: Dep (2021) $ 3,45,000.00 $ 18,400.00 less: Dep (2022) $ 4,80,000.00 $ 18,400.00 Book Value (2022) $ 15,91,000.00 $ 1,47,200.00 Equipment $ 96,000.00 $ 13,800.00 $ 19,200.00 $ 63,000.00 Requirement 1 Depletion Depreciation for Structures Depreciation for Equipment $ $ $ 2021 2022 3,45,000.00 $4,80,000.00 18,400.00 $ 18,400.00 13,800.00 $ 19,200.00 Requirement 2 Mineral Mine Structures Equipment Book Value $ 15,91,000.00 $ 1,47,200.00 $ 63,000.00

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