Zvinakis Mining Company paid $120,000 for the rights to mine lead in southeast M

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.

1 Compute the depletion rate and the units-of-production depreciation rate. (Round your final answers to 3 decimal places.)

Depletion rate per ton =

Depreciation rate per ton =

2. Compute depletion and depreciation for 2016 and 2017.

Depletion 2016 2017

Depreciation 2016 2017

Explanation / Answer

1. Depletion base = $2,320,000 + $1,632,000 - $142,000 = $3,810,000

Depletion rate = $3,810,000 / 2,000,000 = $1.905 per ton

Depreciation base =$1,632,000 - $142,000 = $1,490,000

Depreciation rate = $1,490,000 / 2,000,000 = $0.745 per ton

2. Depletion for 2016 = 220,000 * $1.905 = $419,100

Depletion for 2017 = 620,000 * $1.905 = $1,181,100

Depreciation for 2016 = 220,000 * $0.745 = $163,900

Depreciation for 2017 = 620,000 * $0.745 = $461,900

Related Questions

Navigate

• Browse (All)
• Browse Z
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.