Zvinakis Mining Company paid $120,000 for the rights to mine lead in southeast M
ID: 2484958 • Letter: Z
Question
Zvinakis Mining Company paid $120,000 for the rights to mine lead in southeast Missouri. The cost to drill and erect a mine shaft was $2,320,000, and equipment to process the lead ore before shipment to the smelter was $1,632,000. The mine is expected to yield 2,000,000 tons of ore during the five years it is expected to be operating. The equipment has an estimated residual value of $142,000 when mining is concluded. The mine started operations on April 30, 2016. In 2016, 220,000 tons of ore were extracted, and in 2017, 620,000 tons were mined.
What is the depletion and depreciation per ton?
Explanation / Answer
Acquisition of mining rights and exploration costs = $ 120,000 + $ 2,320,000 = $ 2,440,000
Rate of depletion = $ 2,440,000 / 2,000,000 = $ 1.22 per ton
Depreciation amount of the equipment = $ 1,632,000 - $142,000 = $ 1,490,000
Rate of depreciation per ton = $ 1,490,000 / 2,000,000 = $ 0.745 per ton
2016 2017 Depletion expense $ 268,400 $ 756,400 Depreciation expense $ 163,900 $ 461,900Related Questions
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