At the beginning of 2020, Aristotle Company acquired a mine for $970,000. Of this amount, $100,000 was ascribed to the land value and the remaining portion to the minerals in the mine. Surveys conducted by geologists have indicated that approximately 12,000,000 units of ore appear to be in the mine. Aristotle incurred $170,000 of development costs associated with this mine prior to any extraction of minerals. It also determined that the fair value of its obligation to prepare the land for an alternative use when all of the mineral has been removed was $40,000. During 2020, 2,500,000 units of ore were extracted and 2,100,000 of these units were sold. Instructions Compute the following. a. The total amount of depletion for 2020. b. The amount that is charged as an expense for 2020 for the cost of the minerals sold during 2020.

At the beginning of 2020, Aristotle Company acquired a mine for $970,000. Of this amount, $100,000 was ascribed to the land value and the remaining portion to the minerals in the mine. Surveys conducted by geologists have indicated that approximately 12,000,000 units of ore appear to be in the mine. Aristotle incurred $170,000 of development costs associated with this mine prior to any extraction of minerals. It also determined that the fair value of its obligation to prepare the land for an alternative use when all of the mineral has been removed was $40,000. During 2020, 2,500,000 units of ore were extracted and 2,100,000 of these units were sold. Instructions Compute the following. a. The total amount of depletion for 2020. b. The amount that is charged as an expense for 2020 for the cost of the minerals sold during 2020.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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