Computing the Acquisition and Depletion of a Natural Resource
Freeport-McMoRan Copper&Gold Inc., headquartered in Phoenix, Arizona, is one of the world’s largest copper, gold, and molybdenum mining and production companies, with its principal asset in natural resource reserves (approximately 102.0 billion pounds of copper, 40.0 million ounces of gold, 2.48 billion pounds of molybdenum, 266.6 million ounces of silver, and 0.7 billion pounds of cobalt, as of the end of 2008). Its annual revenues exceed $17.7 billion.
Assume that in February 2012. Freeport-McMoRan paid $700,000 for a mineral deposit in Indonesia. During March, it spent $74,000 in preparing the deposit for exploitation. It was estimated that 900,000 total cubic yards could be extracted economically. During 2012, 60,000 cubic yards were extracted. During January 2013, the company spent another $6,000 for additional developmental work that increased the estimated productive capacity of the mineral deposit.
Required:
1. Compute the acquisition cost of the deposit in 2012.
2. Compute depletion for 2012.
3. Compute the net book value of the deposit after payment of the January 2013 developmental costs.
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