On July 1 of the current year, a company pays $6,948, 480 cash for an ore mine estimated to contain 7,896.000 tons of ore. It installs and pays for machinery costing $1,421,280 cash on July 2. The company removes and sells 407,250 tons of ore during its first six months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine's depletion as the machinery will be abandoned after the ore is mined. Prepare entries to record.a. purchase of the ore mineb. the cost and installation of machineryc. the first six months' depletion assuming the ore mine has a net salvage value of zero after the ore is minedd. the first six months' depreciation on the machinery.
On July 1 of the current year, a company pays $6,948, 480 cash for an ore mine estimated to contain 7,896.000 tons of ore. It installs and pays for machinery costing $1,421,280 cash on July 2. The company removes and sells 407,250 tons of ore during its first six months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine's depletion as the machinery will be abandoned after the ore is mined. Prepare entries to record.a. purchase of the ore mineb. the cost and installation of machineryc. the first six months' depletion assuming the ore mine has a net salvage value of zero after the ore is minedd. the first six months' depreciation on the machinery.
Chapter1: Financial Statements And Business Decisions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:On July 1 of the current year, a company pays $6,948, 480 cash for an ore mine estimated to
contain 7,896.000 tons of ore. It installs and pays for machinery costing $1,421, 280 cash on
July 2. The company removes and sells 407,250 tons of ore during its first six months of
operations ending on December 31. Depreciation of the machinery is in proportion to the
mine's depletion as the machinery will be abandoned after the ore is mined. Prepare entries to
record.a. purchase of the ore mineb. the cost and installation of machineryc. the first six
months' depletion assuming the ore mine has a net salvage value of zero after the ore is
minedd. the first six months' depreciation on the machinery.
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