Login oe Register Manhein Question 6 (of 8) 10.00 points In 2016, the Marion Com
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Login oe Register Manhein Question 6 (of 8) 10.00 points In 2016, the Marion Company purchased land containing a mineral mine for $1,850,000. Additional costs of $745,000 were incurred to develop the mine. Geologists estimated that 450,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $120,000 To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $180,000. These structures have a useful life of 10 years. The structures cannot be moved after the ore has been removed and will be left at the site. In addition, new equipment costing $111,000 was purchased and installed at the site. Marion does not plan to move the equipment to another site, but estimates that it can be sold at auction for $3,000 after the mining project is completed. In 2016, 55,000 tons of ore were extracted and sold. In 2017, the estimate of total tons of ore in the mine was revised from 450,000 to 537,500. During 2017, 85,000 tons were extracted, of which 65.000 tons were sold Required: 1. Compute depletion and depreciation of the mine and the mining facilities and equipment for 2016 and 2017. Marion uses the units-of-production method to determine depreciation on mining facilities and equipment. (Do not round intermediate calculations) Depletion of mineral mine S Depreciation of structures$ 302,500 22,000 13,200 Depreciation df aioment $ 13200Explanation / Answer
Purchase price $1,850,000
Development costs 745,000
$2,595,000
Depletion:
$2,595,000 - 120,000
Depletion per ton = = $5.50 per ton
450,000 tons
2011 depletion = $5.50 x 55,000 tons = $302,500
2012 depletion:
Revised depletion rate = ($2,595,000 - 302,500) - 120,000
= $4.50
537,500 - 55,000 tons
(note I have rounded the rate to two units so answer may differ slightly , if rounding is not required simply multiply the answer with 85,000 tons without rounding
In that case 4.502590673*85,000 = 382,720 will be the answer, apply same rule for rest of the calculations for year 2012)
2012 depletion = $4.50 x 85,000 tons = $382,500
Depreciation:
Structures:
$180,000
Depreciation per ton = = $.40 per ton
450,000 tons
2011 depreciation = $.40 x 55,000 tons = $22,000
2012 depreciation:
Revised depreciation rate = $180,000 – 22,000
= $.33
537,500 - 55,000 tons
2012 depreciation = $.33 x 85,000 tons = $28,050
Equipment:
$111,000 - 3,000
Depreciation per ton = = $.24 per ton
450,000 tons
2011 depreciation = $.24 x 55,000 tons = $13,200
2012 depreciation:
Revised depreciation rate = ($111,000 – 13,200) - 3,000
= $.196
537,500 - 55,000 tons
2012 depreciation = $.196 x 85,000 tons = $16,660
Requirement 2
Mineral mine:
Cost $ 2,595,000
Less accumulated depletion:
2011 depletion $302,500
2012 depletion 382,500 685,500
Book value, 12/31/12 $1,910,000
Structures:
Cost $ 180,000
Less accumulated depreciation:
2011 depreciation $22,000
2012 depreciation 28,050 50,050
Book value, 12/31/12 $129,950
Equipment:
Cost $ 111,000
Less accumulated depreciation:
2011 depreciation $ 13,200
2012 depreciation 16,660 29,860
Book value, 12/31/12 $81,140
Purchase price $1,850,000
Development costs 745,000
$2,595,000
Depletion:
$2,595,000 - 120,000
Depletion per ton = = $5.50 per ton
450,000 tons
2011 depletion = $5.50 x 55,000 tons = $302,500
2012 depletion:
Revised depletion rate = ($2,595,000 - 302,500) - 120,000
= $4.50
537,500 - 55,000 tons
(note I have rounded the rate to two units so answer may differ slightly , if rounding is not required simply multiply the answer with 85,000 tons without rounding
In that case 4.502590673*85,000 = 382,720 will be the answer, apply same rule for rest of the calculations for year 2012)
2012 depletion = $4.50 x 85,000 tons = $382,500
Depreciation:
Structures:
$180,000
Depreciation per ton = = $.40 per ton
450,000 tons
2011 depreciation = $.40 x 55,000 tons = $22,000
2012 depreciation:
Revised depreciation rate = $180,000 – 22,000
= $.33
537,500 - 55,000 tons
2012 depreciation = $.33 x 85,000 tons = $28,050
Equipment:
$111,000 - 3,000
Depreciation per ton = = $.24 per ton
450,000 tons
2011 depreciation = $.24 x 55,000 tons = $13,200
2012 depreciation:
Revised depreciation rate = ($111,000 – 13,200) - 3,000
= $.196
537,500 - 55,000 tons
2012 depreciation = $.196 x 85,000 tons = $16,660
Requirement 2
Mineral mine:
Cost $ 2,595,000
Less accumulated depletion:
2011 depletion $302,500
2012 depletion 382,500 685,500
Book value, 12/31/12 $1,910,000
Structures:
Cost $ 180,000
Less accumulated depreciation:
2011 depreciation $22,000
2012 depreciation 28,050 50,050
Book value, 12/31/12 $129,950
Equipment:
Cost $ 111,000
Less accumulated depreciation:
2011 depreciation $ 13,200
2012 depreciation 16,660 29,860
Book value, 12/31/12 $81,140
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