On January 1, 2018, Lam Company, a calendar year corporation, purchased the rights to a mine. The total purchase price was 16,400,000, of which 2,000,000 was allocable to the land. Estimated reserves were 1,800,000 tons. The entity expected to extract and sell 25,000 tons per month. The entity purchased new equipment on March 1, 2018 for 7,500,000. The equipment had a useful life of 8 years. However after all the resource is removed, the equipment would be of no use and could be sold for 300,000. What amount should be recorded as depletion for 2018? What amount should be recorded as depreciation of the mining equipment for 2018?
On January 1, 2018, Lam Company, a calendar year corporation, purchased the rights to a mine. The total purchase price was 16,400,000, of which 2,000,000 was allocable to the land. Estimated reserves were 1,800,000 tons. The entity expected to extract and sell 25,000 tons per month. The entity purchased new equipment on March 1, 2018 for 7,500,000. The equipment had a useful life of 8 years. However after all the resource is removed, the equipment would be of no use and could be sold for 300,000. What amount should be recorded as depletion for 2018? What amount should be recorded as depreciation of the mining equipment for 2018?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
On January 1, 2018, Lam Company, a calendar year corporation, purchased the rights to a mine. The
total purchase price was 16,400,000, of which 2,000,000 was allocable to the land. Estimated reserves were
1,800,000 tons. The entity expected to extract and sell 25,000 tons per month. The entity purchased new
equipment on March 1, 2018 for 7,500,000. The equipment had a useful life of 8 years. However after all the
resource is removed, the equipment would be of no use and could be sold for 300,000.
What amount should be recorded as depletion for 2018?
What amount should be recorded as
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education