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In 2018 ' The Marion Company purchased land ' | ||||
containing mineral mines amount to $ | 1,300,000 | |||
Additional cost incurred to develop mines $ | 493,000 | |||
Geologist expect mineral ore Ton | 340,000 | |||
After ore extracted land resale value would be $ | 110,000 | |||
Additional structure cost ' $ | 117,300 | |||
Udeful life Years | 10 | |||
New equipment purchased and installed at site $ | 66,200 | |||
estimate that it could be sold @ auction $ | 5,000 | |||
In 2018 total ore extracted and sold Ton | 44,000 | |||
in 2019 , total Ton of mineral revised from | ||||
340000 to 427500 | ||||
in 2019 , total ore extarcted Ton | 74,000 | |||
Sale in Ton | 54,000 |
Depletion Vs Depreciation - First calculated depletion in 2018 and 2019 . please see below depletion amount in 2018 and 2019 as below :
Depletion - MINE
Solution | Year 2018 | Amnt($) | |||
containing mineral mines amount to $ | 1,300,000 | ||||
( Purchase Price)' | |||||
Add - Cost incurred further to develop | 493,000 | ||||
Total Cost | 1,793,000 | ||||
Less - Salvage value | 110,000 | ||||
Depreciable Cost | 1,683,000 | a | |||
Numbe rof ton extracted as certified by- Ton | 340,000 | b | |||
Geologist | |||||
depletion rate | 5 | (a/b)=C | |||
In 2018 total ore extracted and sold Ton | 44,000 | D | |||
Depletion cost $ | 217,800 | (C*D) |
Year 2019 | Amnt($) | ||||
Total cost as derived just above | 1,793,000 | ||||
Less depletion amount as calculated above | 217800 | ||||
Balance amount | 1,575,200 | ||||
Less - Salvage value | 110,000 | ||||
Depreciable Cost Balance | 1,465,200 | m | |||
Extracted Ore after sold 44000 Ton | |||||
Balance Ton ( 427500-44000)== 383500 To'n | 383500 | n | |||
Revised depletion rate | 3.82 | (m/n)=p | |||
in 2019 , total ore extarcted Ton | 74,000 | Q | |||
Depletion amount $ | 282,724 | (p*Q) |
Depreciation STRUCTURE
Depreciation - 2018' | Amount $ | |||
Additional structure cost | 117,300 | a | ||
Numbe rof ton extracted as certified by- Ton | 340,000 | b | ||
Depreciation rate - 2018' | 0.345 | (a/b)=C | ||
In 2018 total ore extracted and sold Ton | 44,000 | D | ||
Depreciation cost relates 2018 | 15,180 | (c*d)' | ||
Additional structure cost | 117,300 | |||
Less - depreciation cost ( as above)' | 15,180 | |||
Balance depreciation cost | 102,120 | m | ||
Balance Ton ( 427500-44000)== 383500 To'n | 383500 | n | ||
Depreciation rate - 2019 | 0.27 | (m/n)=p | ||
in 2019 , total ore extarcted Ton | 74,000 | q | ||
Depreciation cost'- 2019 | 19,705 | (p*q) |
Depreciation - Equipment- 2018 | ||||
Amount $ | ||||
New equipment purchased and installed at site $ | 66,200 | |||
Less - Salvage value | 5,000 | |||
Depreciable cost | 61,200 | a | ||
Numbe rof ton extracted as certified by- Ton | 340,000 | b | ||
Depreciation rate | 0.18 | (a/b)=C | ||
In 2018 total ore extracted and sold Ton | 44,000 | D | ||
Depreciation cost 2018 | 7,920 | (c*d) | ||
Amount $ | ||||
New equipment purchased and installed at site $ | 66,200 | |||
less - depreciation 2018 as calculated above | 7,920 | |||
Balance amount | 58,280 | |||
Less - salvage value as above' | 5,000 | |||
Remaining value | 53,280 | a | ||
Balance Ton ( 427500-44000)== 383500 To'n | 383500 | b | ||
revised depreciation rate - Equipment | 0.14 | (a/b( =C | ||
in 2019 , total ore extarcted Ton | 74,000 | D | ||
Depreciation cost 2019 | 10,281 | (C*D) |
Book Value calculation - three sector based on above Number
Mine' $ | Structure $ | Equipment $ | ||
Depletion/ Depreciation-A | 2018 | 217,800 | 15,180 | 7,920 |
Depletion/ Depreciation-B | 2019 | 282,724 | 19,705 | 10,281 |
total
/Accumulated depreciation / depletion (A+B) |
500,524 | 34,885 | 18,201 | |
Original cost of Asset | 1793000 | 117300 | 66200 | |
Less | ||||
Accumulated depreciation/ Depletion- as above | 500,524 | 34,885 | 18,201 | |
Book Value | 1,292,476 | 82,415 | 47,999 |
Problem 11-7 Depletion; change in estimate (L011-3. 11-5) In 2018, the Marion Company purchased and containing...
In 2018, the Marion Company purchased land containing a mineral mine for $1,660,000. Additional costs of $723,000 were incurred to develop the mine. Geologists estimated that 700,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $108,000. To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $455,000. These structures have a useful life of 10 years. The structures cannot...
In 2018, the Marion Company purchased land containing a mineral mine for $1,640,000. Additional costs of $564,000 were incurred to develop the mine. Geologists estimated that 600,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $104,000. To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $252,000. These structures have a useful life of 10 years. The structures cannot...
In 2021, the Marion Company purchased land containing a mineral mine for $1,450,000. Additional costs of $547,000 were incurred to develop the mine. Geologists estimated that 370,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $110,000. To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $133,200. These structures have a useful life of 10 years. The structures cannot...
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...
In 2021, the Marion Company purchased land containing a mineral mine for $2,050,000. Additional costs of $843,000 were incurred to develop the mine. Geologists estimated that 490,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $100,000. To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $205,800. These structures have a useful life of 10 years. The structures cannot...
Problem 11-13 Depreciation and depletion; change in useful life; asset retirement obligation; Chapters 10 and 11 [LO11-2, 11-3, 11-5] On May 1, 2018, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $9 million. Additional costs and purchases included the following (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from...
On May 1, 2021, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $9.2 million. Additional costs and purchases included the following (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): Development costs in preparing the mine Mining equipment Construction of various structures on site $2,400,000 146,800...
On April 23, 2021, Trevors Mining entered into an agreement with the state of California to obtain the rights to operate a mineral mine in California for $13.0 million. Additional costs and purchases included the following: Preparation of site for excavation $ 4,550,000 Mining equipment 400,000 Construction of various structures on site 270,000 After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $71,500. The structures will be torn down. The...
On May 1, 2021, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $11.0 million. Additional costs and purchases included the following (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): Development costs in preparing the mine Mining equipment Construction of various structures on site $4,200,000 146,000...
On May 1, 2021, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $9.2 million. Additional costs and purchases included the following (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): Development costs in preparing the mine Mining equipment Construction of various structures on site $2,400,000 146,800...