The Hoppe Corporation has purchased a coal mine for 6.3 million dollars. They es

Question

The Hoppe Corporation has purchased a coal mine for 6.3 million dollars. They estim the total coal to be mined will be 300,000 tons. When they are finished with the mine they expect to sell it as a tunnel of love for $300,000. During the first year, they mine 75,000 tons of coal. What is the amount of depletion? PROBLEM #3 The Racine Co. purchased a patent for $75,000. However, they have been offered $80,000 to sell it to their competitor, the Porras Company. They expect the patent to be useful for 5 years although the patent still has 10 years before it expires. What is the amount of amortization for the first year?

Explanation / Answer

Problem 2)

Amount of depletion:

= Cost of coal mine×Coal extracted during the first year÷Total coal volume expected

= $6,300,000×75,000÷300,000

= $1,575,000

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