Question
In 2013, the Marion Company purchased land containing a mineral mine for $1,400,000. Additional costs of $538,000 were incurred to develop the mine. Geologists estimated
In 2013, the Marion Company purchased land containing a mineral mine for $1,400,000. Additional costs of $538,000 were incurred to develop the mine. Geologists estimated that 360,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $120,000. |
To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $127,800. These structures have a useful life of 10 years. The structures cannot be moved after the ore has been removed and will be left at the site. In addition, new equipment costing $85,800 was purchased and installed at the site. Marion does not plan to move the equipment to another site, but estimates that it can be sold at auction for $3,000 after the mining project is completed. |
In 2013, 46,000 tons of ore were extracted and sold. In 2014, the estimate of total tons of ore in the mine was revised from 360,000 to 447,500. During 2014, 76,000 tons were extracted, of which 56,000 tons were sold. |
Required: | |
1. | Compute depletion and depreciation of the mine and the mining facilities and equipment for 2013 and 2014. Marion uses the units-of-production method to determine depreciation on mining facilities and equipment. (Do not round intermediate calculations.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started