On July 1, 2017, Lethargic Company, a calendar year entity, purchased the rights to a mine. The total purchase price was 14,000,000 of which 2,000,000 was allocable to the land. Estimated reserves were 1,500,000 tons. The entity expects to extract and sell 25,000 tons per month. The entity purchased new equipment on July 1, 2017. The equipment was purchased for 8,000,000 and had a useful life of 8 years. However, after all the resource is removed, the equipment will be of no use and will be sold for 500,000. What is the depletion for 2017?
On July 1, 2017, Lethargic Company, a calendar year entity, purchased the rights to a mine. The total purchase price was 14,000,000 of which 2,000,000 was allocable to the land. Estimated reserves were 1,500,000 tons. The entity expects to extract and sell 25,000 tons per month. The entity purchased new equipment on July 1, 2017. The equipment was purchased for 8,000,000 and had a useful life of 8 years. However, after all the resource is removed, the equipment will be of no use and will be sold for 500,000. What is the depletion for 2017?
Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion
Section: Chapter Questions
Problem 29CE
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Question
On July 1, 2017, Lethargic Company, a calendar year entity, purchased the rights to a mine. The total purchase price was 14,000,000 of which 2,000,000 was allocable to the land.
Estimated reserves were 1,500,000 tons. The entity expects to extract and sell 25,000 tons per month.
The entity purchased new equipment on July 1, 2017. The equipment was purchased for 8,000,000 and had a useful life of 8 years.
However, after all the resource is removed, the equipment will be of no use and will be sold for 500,000.
What is the depletion for 2017?
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