c) Fenmore Corporation purchased a mineral deposit, makingpayment as follows: Ca

Question

c) Fenmore Corporation purchased a mineral deposit, makingpayment as follows: Cash $500,000 and Fenmore Corporation commonstock (par $10), 6,000 shares. On the date of the purchase, themineral deposit had an appraised value of $800,000; the commonstock was quoted on the market at $40 per share. Other acquisitioncosts amounted to $25,000 cash. The cost recorded for themineral deposit was

d) On March 1, 2009, Aniston Company purchased a producing oilwell at a cash cost of $1,000,000. It is estimated that1,500,000 barrels of oil can be produced over the remaining life ofthe well. By December 31, 2009 (end of the accountingperiod), 150,000 barrels of oil were produced andsold. The amount of depletion expense for 2009 on this wellwould be

Explanation / Answer

$1,50,000 X$0.67

$100,500

A. Book value on 1 july 2003 $15,000 ($50000 - 32600 - 2400) Cash proceeds from machine ($12,000) sold Loss on disposal of machine $3,000 B. Depreciation    = $50000 - $5000 /10 $4,500 For 8 years = $4500 X8 = $36000 Book value after 8 years   = $50000 - $36000                   = $14,000 Machine sold                   = ($10,000) Loss on disposal of machine $4,000 C. Cost of Mineral deposit Cash $500,000 Common stock $240,000 (6000 X$40) Additional acqui- $25,000 sition cost Total Cost of $765,000 Mineral deposit D. Depletion cost per Total cost / total estimated units available unit $1,000,000 / 15,00,000 $0.67 per barrels Depletion expense

$1,50,000 X$0.67

$100,500

       

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