Marigold Mining Company has purchased a tract of mineral land for $972,000. It is estimated that this tract will yield 129,600 tons ofore with sufficient mineral content to make mining and processing profitable. It is further estimated that 6,480 tons of ore will bemined the first and last year and 12,960 tons every year in between. (Assume 11 years of mining operations.) The land will have asalvage value of $32,400.The company builds necessary structures and sheds on the site at a cost of $38,880. It is estimated that these structures canserve 15 years but, because they must be dismantled if they are to be moved, they have no salvage value. The company does not intendto use the buildings elsewhere. Mining machinery installed at the mine was purchased secondhand at a cost of $64,800. Thismachinery cost the former owner $162,000 and was 50% depreciated when purchased. Marigold Mining estimates that about half ofthis machinery will still be useful when the present mineral resources have been exhausted, but that dismantling and removal costswill just about offset its value at that time. The company does not intend to use the machinery elsewhere. The remaining machinerywill last until about one-half the present estimated mineral ore has been removed and will then be worthless. Cost is to be allocatedequally between these two classes of machinery. Also compute the depreciation and depletion for the first year assuming actual production of 5,400 tons. Nothing occurred duringthe year to cause the company engineers to change their estimates of either the mineral resources or the life of the structures andequipment. (Round per unit answers to 2 decimal places, e.g. 0.45 for computational purposes and final answers to O decimal places, e.g.45,892.)DepletionLA$tADepreciation $

Depletion is used in the mining and depletion is decrease in value of mines due to extraction of…

old Mining Company has purchased a tract of mineral land for $972,000. It is estimated that this tract will yield 1 ith sufficient mineral content to make mining and processing profitable. It is further estimated that 6,480 tons of the first and last year and 12,960 tons every year in between. (Assume 11 years of mining operations.) The land ge value of $32,400. ompany builds necessary structures and sheds on the site at a cost of $38,880. It is estimated that these structur 15 years but, because they must be dismantled if they are to be moved, they have no salvage value. The company the buildings elsewhere. Mining machinery installed at the mine was purchased secondhand at a cost of $64,800 inery cost the former owner $162,000 and was 50% depreciated when purchased. Marigold Mining estimates th machinery will still be useful when the present mineral resources have been exhausted, but that dismantling and re st about offset its value at that time. The company does not intend to use the machinery elsewhere. The remainin

old Mining Company has purchased a tract of mineral land for $972,000. It is estimated that this tract will yield 1 ith sufficient mineral content to make mining and processing profitable. It is further estimated that 6,480 tons of the first and last year and 12,960 tons every year in between. (Assume 11 years of mining operations.) The land ge value of $32,400. ompany builds necessary structures and sheds on the site at a cost of $38,880. It is estimated that these structur 15 years but, because they must be dismantled if they are to be moved, they have no salvage value. The company the buildings elsewhere. Mining machinery installed at the mine was purchased secondhand at a cost of $64,800 inery cost the former owner $162,000 and was 50% depreciated when purchased. Marigold Mining estimates th machinery will still be useful when the present mineral resources have been exhausted, but that dismantling and re st about offset its value at that time. The company does not intend to use the machinery elsewhere. The remainin

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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