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.

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.

Name: PA6. LO 11.3 Gimli Miners recently purchased the rights to a diamond
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Description: PA6. LO 11.3 Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons ofore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The follo

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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#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.
6. 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…
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Exercise One On July 1, 2022, Phillips Inc. Invested $480,000 in a mine estimated to have 800,000 tonnes of ore. At the end of production at the mine, the company estimates it will have to spend $150,000 to restore the site to an environmentally acceptable condition. The property will then be sold for $90,000. During the last six months of 2022, 100,000 tonnes of ore were mined and sold. Amortizable Cost per Unit: Amount of Amortization Allocated: Amount to be allocated to the restoration liability: a) Prepare the journal entry to record the depletion expense. Date Particulars Debit Credit
7 A firm requires power shovels for its open pit mining operation. This mining equipment, with a first cost of $200,000, has an estimated salvage value of $50,000 at the end of 8 years’ service. If interest rate is 12%, calculate the amount of earning on an equivalent annual basis so that the firm recovers its investment capital plus earns a return on the capital committed to the equipment during its life time.
Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. The company estimated the following cash flows related to opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years Salvage value of equipment in four years. $ 330,000 $ 200,000 $ 135,000* $ 60,000 $ 85,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted?
A coal company invests $20 million in a mine estimated to have 25 million tons of coal and no salvage value. It is expected that the mine will be in operation for 5 years. In the first year, 1070000 tons of coal are extracted and sold. What is the depletion for the first year? O $85600 O $856000 $256800 O Cannot be determined from the information provided
#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 $24.00 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 $1.31 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.15 million per year and cost $1.69 million per year over the 10-year life of the project. Marketing estimates 10.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 24.00%. The WACC is 14.00%. Find the NPV (net present value). Answer format: Currency: Round to: 2 decimal places.
4. A company bought a machine three years ago at a cost of $ 55,000 . The expected life at the time of purchase was 10 years with a $ 5,000 salvage value and an annual operating cost of $ 2,700 . A new machine is now under consideration that costs $ 40,000 . It is projected to have a life of 12 years , a salvage value of $ 3,500 and an annual operating cost of $ 7,200 . Compute the required Trade - In Value ( Replacement Value ) of the presently owned machine if the new machine is to be bought using a discount rate of 12 % per year .
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