Question

Help Save & El Submit Check my work mode: This shows what is correct or Incorrect for the work you have completed so far. It does not indicate completion Return to question Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,000,000 in 2018 for the mining site and spent an additional $600,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately four years, the company is required to restore the land to its original condition, including repaving of roads and replacing a greenbelt. The company has provided the following three cash flow possibilities for the restoration costs (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.: Probability Outflow $300,000 400,000 600,000 400 To aid extraction, Jackpot purchased some new equipment on July 1, 2018, for $120,000. After the copper is removed from this mine, the equipment will be sold for an estimated residual amount of $20,000. There will be no residual value for the copper mine. The credit-adjusted risk-free rate of interest is 10%. The company expects to extract 10 million pounds of copper from the mine. Actual production was 1.6 million pounds in 2018 and 3 million pounds in 2019. Required: 1. Compute depletion and depreciation on the mine and mining equipment for 2018 and 2019. The units-of-production method is used to calculate depreciation. (The expected format for rounding is presented in the appropriate rows of the table. Round your final answers to nearest whole dollar.)

explain each year 2018 and 2019

Answer 1

Restoration Cost
Possibility 1	$       3,00,000	25%	$       75,000
Possibility 2	$       4,00,000	40%	$   1,60,000
Possibility 3	$       6,00,000	35%	$   2,10,000
			$   4,45,000
table or calculator function			P.V of $1
		n =	4
Present Value of Restoration Cost		i =	10%
			$   3,03,939
Cost of Copper Mine
Minning Site			$ 10,00,000
Developement Cost			$   6,00,000
Restoration Cost			$   3,03,939
Cost of Copper Mine			$ 19,03,939
Depletion expense (mine)	2018	2019
Depletion per pound	$           0.1904	$           0.1904	($1903939/10000000)
Pounds extracted	16,00,000	30,00,000
Depletion expense	$       3,04,630	$       5,71,182
Depletion expense (mining equipment)	2018	2019
Depreciation per pound	$                0.01	$               0.01	[(120000-20000)/10000000]
Pounds extracted	16,00,000	30,00,000
Depreciation expense	$           16,000	$           30,000

If it is helpful, please rate the answer and if any doubt arises let me know