Purchase date: 31-Dec-20 Purchase price: $ 4,000,000 Additional expenditures $ 5,000,000 Useful life (years) 18 Total est. output 2,500,000 Decommissioning cost $ 2,750,000 Discount rate 5% 2021 output 115,000 Required a) Prepare all journal entries for the years ended December 31, 2020 and 2021. b) The mining operations ceased on December 31, 2034. A total of 2,000,000 ounces were mined at the end of December 31, 2033. A total of 225,000 ounces were mined during the year ended December 31, 2034. Write all journal entries at December 31, 2034.
Purchase date: 31-Dec-20 Purchase price: $ 4,000,000 Additional expenditures $ 5,000,000 Useful life (years) 18 Total est. output 2,500,000 Decommissioning cost $ 2,750,000 Discount rate 5% 2021 output 115,000 Required a) Prepare all journal entries for the years ended December 31, 2020 and 2021. b) The mining operations ceased on December 31, 2034. A total of 2,000,000 ounces were mined at the end of December 31, 2033. A total of 225,000 ounces were mined during the year ended December 31, 2034. Write all journal entries at December 31, 2034.
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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| Purchase date: | 31-Dec-20 | |||||||||
| Purchase price: | $ 4,000,000 | |||||||||
| Additional expenditures | $ 5,000,000 | |||||||||
| Useful life (years) | 18 | |||||||||
| Total est. output | 2,500,000 | |||||||||
| Decommissioning cost | $ 2,750,000 | |||||||||
| Discount rate | 5% | |||||||||
| 2021 output | 115,000 | |||||||||
| Required | ||||||||||
| a) Prepare all |
||||||||||
| b) | The mining operations ceased on December 31, 2034. A total of 2,000,000 ounces were mined at the end of December 31, 2033. | |||||||||
| A total of 225,000 ounces were mined during the year ended December 31, 2034. Write all journal entries at December 31, 2034. |
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