On July 23 of the current year, Dakota Mining Co. pays $8,343,600 for land estim
ID: 2380486 • Letter: O
Question
On July 23 of the current year, Dakota Mining Co. pays $8,343,600 for land estimated to contain 9,816,000 tons of recoverable ore. It installs machinery costing $1,570,560 that has a 10-year life and no salvage value and is capable of mining the ore deposit in eight years. The machinery is paid for on July 25, seven days before mining operations begin. The company removes and sells 504,750 tons of ore during its first five months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine
On July 23 of the current year, Dakota Mining Co. pays $8,343,600 for land estimated to contain 9,816,000 tons of recoverable ore. It installs machinery costing $1,570,560 that has a 10-year life and no salvage value and is capable of mining the ore deposit in eight years. The machinery is paid for on July 25, seven days before mining operations begin. The company removes and sells 504,750 tons of ore during its first five months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine
Explanation / Answer
Depletion Expense = (Cost - salvage value) x No.of units extratced/Estimated no.of units
= (8343600 + 1570560 - 0) x 504750/9816000
= $509797.50
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