Problem 11-05 (Part Level Submission) Nash Mining Company has purchased a tract of mineral land for $936,000. It is estimated that this tract will yield 124,800 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that 6,240 tons of ore will be mined the first and last year and 12,480 tons every year in between. (Assume 11 years of mining operations. The land will have a salvage value of $31,200. The company builds necessary structures and sheds on the site at a cost of $37,440. 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 $62,400. This machinery cost the former owner $156,000 and was 50% depreciated when purchased. Nash Mining estimates that about half of this machinery will still be useful when the present mineral resources have been exhausted, but that dismantling and remaining machinery will 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, As chief accountant for the company, you are to prepare a schedule showing estimated depletion and depreciation costs for each year of the expected life of the mine. (Round per unit answers to 2 decimal places, e.g. 0.45 for computational purposes and final answers to 0 decimal places, e.g. 45,892.) Estimated depletion cost Depletion 1st Yr 45240 Year 2nd Yr 90480 3rd Yr. 90480 4th Y 904801 5th Yr 90480 6th Yr 90480 7th Yr 90480 gth Yi 90480 9th Yr 90480 10th Yr 90480 11th YI 45240 Estimated depreciation cost Machinery (1/2) Useful at End Machinery (1/2) Worthless at End Year Building 1st Yr 1872 1560 3120 2nd Yr 3744 3120 6240 3rd Yr. 3744 3120 6240 4th Yr. 3744 3120 6240 5th Yr. 3744 3120 6240 6th Yr. 3744 3120 3120 7th Yr 3744 3120 gth Yr. 3744 3120 gth Yr. 3744 3120 Loth Yr 3744 3120 11th Yr 1872 1560 SHOW SOLUTION LINK TO TEXT LINK TO TEXT Attempts: 5 of 5 used (b) Also compute the depreciation and depletion for the first year assuming actual production of 5,200 tons. Nothing occurred during the year to cause the company engineers to change their estimates of either the mineral resources or the life of the structures and equipment. (Round per unit answers to 2 decimal places, e.g. 0.45 for computational purposes and final answers to o decimal places, e.g. 45,892.) Depletion Depreciations Problem 11-05 (Part Level Submission) Nash Mining Company has purchased a tract of mineral land for $936,000. It is estimated that this tract will yield 124,800 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that 6,240 tons of ore will be mined the first and last year and 12,480 tons every year in between. (Assume 11 years of mining operations. The land will have a salvage value of $31,200. The company builds necessary structures and sheds on the site at a cost of $37,440. 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 $62,400. This machinery cost the former owner $156,000 and was 50% depreciated when purchased. Nash Mining estimates that about half of this machinery will still be useful when the present mineral resources have been exhausted, but that dismantling and remaining machinery will 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, As chief accountant for the company, you are to prepare a schedule showing estimated depletion and depreciation costs for each year of the expected life of the mine. (Round per unit answers to 2 decimal places, e.g. 0.45 for computational purposes and final answers to 0 decimal places, e.g. 45,892.) Estimated depletion cost Depletion 1st Yr 45240 Year 2nd Yr 90480 3rd Yr. 90480 4th Y 904801 5th Yr 90480 6th Yr 90480 7th Yr 90480 gth Yi 90480 9th Yr 90480 10th Yr 90480 11th YI 45240 Estimated depreciation cost Machinery (1/2) Useful at End Machinery (1/2) Worthless at End Year Building 1st Yr 1872 1560 3120 2nd Yr 3744 3120 6240 3rd Yr. 3744 3120 6240 4th Yr. 3744 3120 6240 5th Yr. 3744 3120 6240 6th Yr. 3744 3120 3120 7th Yr 3744 3120 gth Yr. 3744 3120 gth Yr. 3744 3120 Loth Yr 3744 3120 11th Yr 1872 1560 SHOW SOLUTION LINK TO TEXT LINK TO TEXT Attempts: 5 of 5 used (b) Also compute the depreciation and depletion for the first year assuming actual production of 5,200 tons. Nothing occurred during the year to cause the company engineers to change their estimates of either the mineral resources or the life of the structures and equipment. (Round per unit answers to 2 decimal places, e.g. 0.45 for computational purposes and final answers to o decimal places, e.g. 45,892.) Depletion Depreciations