Concord Mining Company has purchased a tract of mineral land for $990,000. It is estimated that this tract will yield 132,000 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that 6,600 tons of ore will be mined the first and last year and 13,200 tons every year in between. (Assume 11 years of mining operations.) The land will have a salvage value of $33,000. The company builds necessary structures and sheds on the site at a cost of $39,600. It is estimated that these structures can serve 15 years but, because they must be dismantled if they are to be moved, they have no salvage value. The company does not intend to use the buildings elsewhere. Mining machinery installed at the mine was purchased secondhand at a cost of $66,000. This machinery cost the former owner $165,000 and was 50% depreciated when purchased. Concord Mining estimates that about half of this machinery will still be useful when the present mineral resources have been exhausted, but that dismantling and removal costs will just about offset its value at that time. The company does not intend to use the machinery elsewhere. The remaining machinery will last until about one-half the present estimated mineral ore has been removed and will then be worthless. Cost is to be allocated equally between these two classes of machinery.

Estimated depletion cost Year Depletion 1st Yr. $ 47850 2nd Yr. 95700 3rd Yr. 95700 4th Yr. 95700 5th Yr. 95700 6th Yr. 95700 95700 7th Yr. gth Yr. 95700 9th Yr. 95700 10th Yr. 95700 11th Yr. 47850 Estimated depreciation cost Machinery (1/2) Useful at End Machinery (1/2) Worthless at End Year Building 1st Yr. $ 2nd yr. 3rd Yr. 4th Yr. 5th Yr. 6th Yr. 7th Yr. 8th Yr. 9th Yr. 10th Yr. 11th yr