Question 1 Extractive Industries (18 marks) Jetson company paid $5.6 million for a mining property on 1 July 2017 after the geologists of the company estimated that a gold deposit found on the property would produce 42 000 ounces of gold. In each of the financial years 2017-2018 and 2018-2019, Jetson spent $225 000 per annum developing the property and, during 2018-2019 financial year, the company purchased and installed the following assets: Asset Cost Estimated useful life Mine building $500 000 25 years Mining equipment $820 000 15 years Processing equipment $260 000 10 years The buildings and mining equipment cannot be economically removed from the mine site, but the processing equipment can be removed and relocated to be utilised in another mining property. On 30 June 2019, engineers estimate that development and construction activities have resulted in $680 000 worth of restoration costs that Jetson is obligated to spend at the end of the mine's life under Commonwealth legislation. The company nominates a discount rate of 8% as relevant for its gold operations. Production started on 1 July 2019 and company geologists estimate that it will take eight years to exhaust the economically recoverable reserves, after which time the mine property is expected to be sold for $100 000. Activities in the 2019-20 financial year were: Ounces of gold mined 5 500 Ounces of gold sold 4 800 Selling price per ounce $450 Production costs (before depreciation and amortisation) $510 000 Administration expenses $90 000 Selling expenses $205 000 Income tax expense $150 000 REQUIRED: (1) What are the depreciation expense and the amortisation expense for the year ended 30 June 2020? (11 marks) (2) What is the cost of goods sold (COGS) for the year ended 30 June 2020? (4 marks) (3) What is the finance cost related to restoration for the year ended 30 June 2020? (3 marks) Show your detailed calculations to support your answers. Round to the nearest $ amount. Question 1 Extractive Industries (18 marks) Jetson company paid $5.6 million for a mining property on 1 July 2017 after the geologists of the company estimated that a gold deposit found on the property would produce 42 000 ounces of gold. In each of the financial years 2017-2018 and 2018-2019, Jetson spent $225 000 per annum developing the property and, during 2018-2019 financial year, the company purchased and installed the following assets: Asset Cost Estimated useful life Mine building $500 000 25 years Mining equipment $820 000 15 years Processing equipment $260 000 10 years The buildings and mining equipment cannot be economically removed from the mine site, but the processing equipment can be removed and relocated to be utilised in another mining property. On 30 June 2019, engineers estimate that development and construction activities have resulted in $680 000 worth of restoration costs that Jetson is obligated to spend at the end of the mine's life under Commonwealth legislation. The company nominates a discount rate of 8% as relevant for its gold operations. Production started on 1 July 2019 and company geologists estimate that it will take eight years to exhaust the economically recoverable reserves, after which time the mine property is expected to be sold for $100 000. Activities in the 2019-20 financial year were: Ounces of gold mined 5 500 Ounces of gold sold 4 800 Selling price per ounce $450 Production costs (before depreciation and amortisation) $510 000 Administration expenses $90 000 Selling expenses $205 000 Income tax expense $150 000 REQUIRED: (1) What are the depreciation expense and the amortisation expense for the year ended 30 June 2020? (11 marks) (2) What is the cost of goods sold (COGS) for the year ended 30 June 2020? (4 marks) (3) What is the finance cost related to restoration for the year ended 30 June 2020? (3 marks) Show your detailed calculations to support your answers. Round to the nearest $ amount
