Question

Computing the Acquisition and Depletion of a Natural Resource Freeport-McMoRan Copper & Gold Inc.. headquartered in Phoenix, Arizona, is a leading international mining company of copper, gold, and molybdenum. Its revenues were over $16 billion with net income of nearly $2 billlion in a recent year. Assume that in February 2020, Freeport-McMoRan paid S$800,000 for a mineral deposit in Indonesia. During March, it spent $70,000 in preparing the deposit for exploitation. It was estimated that 1,000,000 total cubic yards could be extracted economically. During 2020, 60,000 cubic yards were extracted. Dur- ing January 2021, the company spent another $6,000 for additional developmental work that increased the estimated productive capacity of the mineral deposit. E8-19 LO8-6 Required 1. Compute the acquisition cost of the deposit in 2020. 2. Compute depletion for 2020. 3. Compute the net book value of the deposit after payment of the January 2021 developmental sts.

Answer 1

1.acquistion cost (800,000 payment+70,000 deposit for preparation)	870,000
2.depletion for 2020 (870,000/1,000,000*60,000 extracted)	52,200
3.book value after payment (870,000 -52,200 depletion + 6000 additional development work)	823,800