FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:PA6. LO 11.3 Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of
ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The following
is the expected extraction for the next five years.
• Year 1: 50,000 tons
Year 2: 90,000 tons
• Year 3: 100,000 tons
Year 4: 110,000 tons
• Year 5: 130,000 tons
Calculate the depletion expense for the next five years, and create the journal entry for year one.
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- am.111.arrow_forward#3 Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $26.00 million. The plant and equipment will be depreciated over 10 years to a book value of $2.00 million, and sold for that amount in year 10. Net working capital will increase by $1.04 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.16 million per year and cost $1.82 million per year over the 10-year life of the project. Marketing estimates 17.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 33.00%. The WACC is 15.00%. Find the NPV (net present value). Submit Answer format: Currency: Round to: 2 decimal places.arrow_forward6. Required information [The following information applies to the questions displayed below.]Beacon Company is considering automating its production facility. The initial investment in automation would be $12.39 million, and the equipment has a useful life of 10 years with a residual value of $1,090,000. The company will use straight-line depreciation. Beacon could expect a production increase of 34,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 75,000 units Current (no automation) 75,000 units Proposed (automation) 109,000 units Proposed (automation) 109,000 units Production and sales volume Per Unit Total Per Unit Total Sales revenue $92 $ ? $ 92 $? Variable costs Direct materials $17 $17 Direct labor 20 ? Variable manufacturing overhead 12 12 Total variable manufacturing costs 49 ? Contribution margin…arrow_forward
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