Question 9

Splish Mining Company has purchased a tract of mineral land for $1,332,000. It is estimated that this tract will yield 177,600 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that 8,880 tons of ore will be mined the first and last year and 17,760 tons every year in between. (Assume 11 years of mining operations.) The land will have a salvage value of $44,400. The company builds necessary structures and sheds on the site at a cost of $53,280. 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 $88,800. This machinery cost the former owner $222,000 and was 50% depreciated when purchased. Splish 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.

(a)

As chief accountant for the company, you are to prepare 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
Year		Depletion
1st Yr.		$enter a dollar amount
2nd Yr.		enter a dollar amount
3rd Yr.		enter a dollar amount
4th Yr.		enter a dollar amount
5th Yr.		enter a dollar amount
6th Yr.		enter a dollar amount
7th Yr.		enter a dollar amount
8th Yr.		enter a dollar amount
9th Yr.		enter a dollar amount
10th Yr.		enter a dollar amount
11th Yr.		enter a dollar amount

Estimated depreciation cost
Year		Building		Machinery (1/2)		Machinery (1/2)
1st Yr.		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
2nd Yr.		enter a dollar amount		enter a dollar amount		enter a dollar amount
3rd Yr.		enter a dollar amount		enter a dollar amount		enter a dollar amount
4th Yr.		enter a dollar amount		enter a dollar amount		enter a dollar amount
5th Yr.		enter a dollar amount		enter a dollar amount		enter a dollar amount
6th Yr.		enter a dollar amount		enter a dollar amount		enter a dollar amount
7th Yr.		enter a dollar amount		enter a dollar amount		enter a dollar amount
8th Yr.		enter a dollar amount		enter a dollar amount		enter a dollar amount
9th Yr.		enter a dollar amount		enter a dollar amount		enter a dollar amount
10th Yr.		enter a dollar amount		enter a dollar amount		enter a dollar amount
11th Yr.		enter a dollar amount		enter a dollar amount		enter a dollar amount

Waterway Paper Products purchased 11,900 acres of forested timberland in March 2025. The company paid $2,028 per acre for this land, which was above the $952 per acre most farmers were paying for cleared land. During April, May, June, and July 2025, Waterway cut enough timber to build roads using moveable equipment purchased on April 1, 2025. The cost of the roads was $290,100, and the cost of the equipment was $267,750; this equipment was expected to have a $10,710 salvage value and would be used for the next 15 years. Waterway selected the straight-line method of depreciation for the moveable equipment. Waterway began actively harvesting timber in August and by December had harvested and sold 642,600 board feet of timber of the estimated 8,032,500 board feet available for cutting. In March 2026, Waterway planted new seedlings in the area harvested during the winter. Cost of planting these seedlings was $142,800. In addition, Waterway spent $9,520 in road maintenance and $7,140 for pest spraying during calendar-year 2026. The road maintenance and spraying are annual costs. During 2026, Waterway harvested and sold 921,060 board feet of timber of the estimated 7,675,500 board feet available for cutting. In March 2027, Waterway again planted new seedlings at a cost of $178,500, and also spent $17,850 on road maintenance and pest spraying. During 2027, the company harvested and sold 773,500 board feet of timber of the estimated 7,735,000 board feet available for cutting. Compute the amount of depreciation and depletion expense for each of the 3 years (2025, 2026, and 2027). Assume that the roads are usable only for logging and therefore are included in the depletion base. (Round times cost per board foot to 2 decimal places e.g. 2.55 and final answers to 0 decimal places, e.g. 45,892.)

		2025		2026		2027
Depletion expense		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Depreciation expense		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount