Jackpot Mining Company operate a copper mine in Central Montana. The company paid 1 million dollars in 2016 for the money site and spending additional $600,000 to prepare the mind for extraction of the copper. After the copper is extracted in approximately for years, the company is required to restore the land to its original condition, including repeating of roads and replacing a Greenbelt. The company has provided the following 3 cash flow possibilities for the restoration costs:

cash outflow. probability 300,000. 25% 400,000. 40% 600,000. 35%

qaid extraction, jackpot purchased some new equipment on July 1st 2016 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 copper mine. The credit adjusted risk-free rate of interest is 10%.

the company expects to extract 10 million pounds of copper from the mine. Actual production was 1.6 million pounds in 2016 and 3 million pounds in 2017.

1. compute depletion and depreciation on the mine and mining equipment for 2016 and 2017 the units of production method is used to calculate depreciation.

2. discuss the accounting treatment of the depletion and depreciation on the mine and mining equipment.