624 SECTION 2 Economic Resources E 11-13 Amortization and depreciation; Chapters 10 and 11 LO2 LO3 Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,000,000 in 2013 for the mining license and spent an additional $600,000 on legal fees 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: Cash Outflow Probability $300,000 25% 400,000 40% 600,000 35% To aid extraction, Jackpot purchased some new equipment on July 1, 2013, 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 mining license. The credit-adjusted risk-free rate of interest is 10%. The company expects to extract 10 pillion pounds of copper from the mine. Actual production was 1.6 million pounds in 2013 and 3 million pounds in 2014. Required: 1. Compute amortization and depreciation on the mining license, equipment and related costs for 2013 and 2014. The units-of-production method is used to calculate depreciation. 2. Discuss the accounting treatment of the amortization and depreciation on the mining license, equipment and related costs