Roscoe Corp. was organized on January 2, 2013. It was authorized to issue 74,000 shares of common stock. On the date of organization, it sold 20,000 shares at $50 per share and gave the remaining shares in exchange for certain land-bearing recoverable ore deposits estimated by geologists at 900,000 tons. The property is deemed to have a value of $2,700,000 with no residual value.
During 2013, purchases of mine buildings and equipment totaled $350,000. During the year, 75,000 tons were mined; 8,000 tons of this amount were unsold on December 31, the balance of the tonnage being sold for cash at $17 per ton. Expenses incurred and paid for during the year, exclusive of depletion and depreciation, were as follows:
Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $173,500
Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,500
Cash dividends of $2 per share were declared on December 31, payable January 15, 2014.
It is believed that buildings and sheds will be useful only over the life of the mine; hence, depreciation is to be recognized in terms of mine output.
Instructions:
Prepare an income statement and a balance sheet for 2013. Ignore income taxes.