Question

E8-19 Computing the Acquisition and Depletion of a Natural Resource Ram Copper & Genc headquartered in the A U al resource company with industry leading global pr S. o natural gas resources and a growing productie profile h o me de approximately 104 billion pounds of copper 19 million co p mohdenum, 283 million ounces of silver, 860 million pounds of build e r mated oil and natural gas reserves. Is annual revenues exceed 214 billion Assume that in February 2016 Freeport McMoran puid S .000 for a mineral depinde e ng March, it spent $70.000 in preparing the deposit for exploitation. I was estimated th chiyants were extracted. Der alcubie yards could be existed economically. During 2016, nuary 2017, the company sent another $6.000 for additional developmental work that increased estimated productive city of the mineral deposit Compute the guisition of the deposit in 2016. Coule deplet for 2016 Compute the the netbook value of the depositater payment of the day Three Different state sets E8-20

Answer 1

1. The acquisition cost is the price at which we purchased the right for extracting mineral and that is $800,000.00. This does not include any cost for preparation for extracting

2. Depletion = Total cost / total number of estimated units

Total cost = acquisition price + any cost for making it ready for extraction = 800,000.00 + 70,000.00= 870,000.00

Total estimated units = 1,000,000

depletion rate per unit = 870,000/1,000,000 = 0.87

No of units extracted during the year = 60,000

Depletion for the year = 60000 * 0.87 = 52,200.00

3, Net book value in 2017 = Total cost - Depletion + additional development expenditure

= 870,000 - 52,200 + 6,000 = 823,800.00