Question

Question 1 Extractive Industries (18 marks) ABC Mining company paid $5.6 million for a mining property on 1 July 2016 after the geologists of the exploration company estimated that a gold deposit found on the property would produce 42 000 ounces of gold. In each of the years 2016-2017 and 2017-2018, ABC spent $225 000 per annum developing the property and, during 2017-2018, the company purchased and installed the following assets: Estimated useful life Asset Cost Mine building $500 000 25 years Mining equipment $820 000 15 years Processing equipment $260 000 years The buildings and mining equipment cannot be economically removed from the mine site, but the processing equipment can be removed On 30 June 2018, engineers estimate that development and construction activities have resulted in $680 000 worth of restoration costs that ABC is obligated to spend at the end of the mine's life under commonwealth legislation. The company nominates a discount rate of 8% as relevant for its gold operations On 30 June 2018, engineers estimate that development and construction activities have resulted in $680 000 worth of restoration costs that ABC is obligated to spend at the end of the mine's life under commonwealth legislation. The company nominates a discount rate of 8% as relevant for its gold operations. Production started on 1 July 2018 and company geologists estimate that it wil take eight years to exhaust the economically recoverable reserves, after which time the mine property is expected to be sold for $100 000. Activities in the 2018-19 financial period were: Ounces of gold mined 5 500 Ounces of gold sold 4 800 Selling price per ounce S450 Production costs (before depreciation and amortization) $510 000 Administration expenses $90 000 $205 000 Selling expenses $150 000 Income tax expense REQUIRED: (1) What are the depreciation expense and the amortisation expense for the year ended 30 June 2019? (11 marks) (2) What is the cost of goods sold (COGS) for the year ended 30 June 2019? (4 marks) (3) What is the finance cost related to restoration for the year ended 30 June 2019? (3 marks) Show your calculations. Round to the nearest S amount.

Answer 1

CLASSTIME Page No. Date fart 8200oo 54667 1S Ammorhsation Rastorchion Call of these will produce Proj foture economic berefin hente ag la Pr 2) Cast Sold fo ヤDepract on amort tion 151179 2 nmce cas 680000-488 6u