On April 17, 2018, the Loadstone Mining Company purchased the rights to a coal mine. The purchase price plusadditional costs necessary to prepare the mine for extraction of the coal totaled $4,500,000. The company expectsto extract 900,000 tons of coal during a four-year period. During 2018, 240,000 tons were extracted and soldimmediately.Required:1. Calculate depletion for 2018.2. Discuss the accounting treatment of the depletion calculated in requirement 1.

On April 17, 2018, the Loadstone Mining Company purchased the rights to a coal mine. The purchase price plusadditional costs necessary to prepare the mine for extraction of the coal totaled $4,500,000. The company expectsto extract 900,000 tons of coal during a four-year period. During 2018, 240,000 tons were extracted and soldimmediately.Required:1. Calculate depletion for 2018.2. Discuss the accounting treatment of the depletion calculated in requirement 1.

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion

Section: Chapter Questions

Problem 29CE

See similar textbooks

Similar questions

On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.
On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.
On April 17, 2021, the Loadstone Mining Company purchased the rights to a coal mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the coal totaled $4,500,000. The company expects to extract 900,000 tons of coal during a four-year period. During 2021, 240,000 tons were extracted and sold immediately. Required:1. Calculate depletion for 2021.2. Is depletion considered part of the product cost and included in the cost of inventory?
On April 17, 2021, the Loadstone Mining Company purchased the rights to a coal mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the coal totaled $4,500,000. The company expects to extract 900,000 tons of coal during a four-year period. During 2021, 240,000 tons were extracted and sold immediately.Required:1. Calculate depletion for 2021.2. Is depletion considered part of the product cost and included in the cost of inventory (yes/no)? Discuss.
On April 17, 2021, the Loadstone Mining Company purchased the rights to a coal mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the coal totaled $3,840,000. The company expects to extract 960,000 tons of coal during a four-year period. During 2021, 320,000 tons were extracted and sold immediately. Calculate depletion for 2021.
On April 17, 2016, the Loadstone Mining Company purchased the rights to a coal mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the coal totaled $4,500,000. The company expects to extract 900,000 tons of coal during a four-year period. During 2016, 240,000 tons were extracted and sold immediately. Required: 1. Calculate depletion for 2016. 2. Discuss the accounting treatment of the depletion calculated in requirement 1.
On April 17, 2024, the Loadstone Mining Company purchased the rights to a copper mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the copper totaled $4,040,000. The company expects to extract 1,010,000 tons of copper during a four-year period. During 2024, 251,000 tons were extracted and sold immediately. Required: 1. Calculate depletion for 2024. 2. Is depletion considered part of the product cost and included in the cost of inventory? 1. Depletion for 2024 2. Is depletion considered part of the product cost and included in the cost of inventory?
In January 2018, HUKAY Mining Corporation purchased a mineral mine for P7,200,000 with removable ore estimated by geological surveys at 4,320,000 tons. The property has an estimated value of P720,000 after the ore has been extracted. HUKAY incurred P2,160,000 of development costs preparing the property for the extraction of ore. During 2018, 540,000 tons were removed and 480,000 tons were sold. For the year ended December 31, 2018, HUKAY included P960,000 of depletion in its cost of goods sold. What should be the amount of depletion to be included in the cost of goods sold? Answer in figures, ignore peso sign.
On April 17, 2024, the Loadstone Mining Company purchased the rights to a copper mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the copper totaled $5,200,000. The company expects to extract 1,040,000 tons of copper during a four-year period. During 2024, 254,000 tons were extracted and sold immediately. Required: Calculate depletion for 2024. Is depletion considered part of the product cost and included in the cost of inventory?
Schilling Corporation purchased a machine on January 1, 2018, at a total cost of $900,000. The machine has an estimated useful life of 10 years or 1,000,000 units of output and a salvage value of $150,000. Instructions: Complete the following table by presenting the annual depreciation expense for the years 2018 and 2019, under the indicated depreciation methods. Assume actual activity in terms of units of output was: 2018—60,000 units and 2019—120,000 units. ——————————————————————————————————————— Annual Depreciation Expense 2018 2019 ——————————————————————————————————————— Straight-Line: $ $ ——————————————————————————————————————— (Supporting Computations) ——————————————————————————————————————— Double-Declining-Balance: $ $ ——————————————————————————————————————— (Supporting Computations)…
In 2017, Bodino Company paid P 4,000,000 to purchase land containing a total estimated 160,000 of extractable mineral deposits. The estimated value of the property after the mineral has been removed is P 800,000. Extraction activities began in 2018 and by the end of the year, 20,000 tons had been recovered and sold. In 2014, geological studies indicated that the total amount of mineral deposits had been underestimated by 60,000 tons. During 2019, 30,000tons were extracted, and 28,000 tons were sold. What is the depletion rate per ton in 2019? a. 12.73 c. 15.56 b. 14.00 d. 20.00
In March, 2017, Mallory Mines Co. purchased a coal mine for $8,000,000. Removable coal is estimated at 1,500,000 tons. Mallory is required to restore the land at an estimated cost of $960,000. The company incurred $200,000 of development costs preparing the mine for production. During 2017, 360,000 tons were removed and sold. The total amount of depletion that Mallory should record for 2017 is Select one: a. $2,428,800. b. $2,198,400. • c. $1,619,200. d. $1,465,600.