1.
Depreciation:
Depreciation refers to the reduction in the monetary value of a fixed asset due to its wear and tear or obsolescence. It is a method of distributing the cost of the fixed assets over its estimated useful life. The following is the formula to calculate the depreciation.
To Compute: The depletion on the mine and mining facilities for the year 2021 and for the year 2022.
2.
Depletion:
Depletion is a concept which is same as depreciation. It is the allocation of cost of natural resources to expense over resource’s the useful time in a systematic and normal manner.
To Compute: The book value of the mineral mine as of December 31, 2022.
3.
Unit-of-activity Method:
Under this method of depreciation, the depreciation expense is calculated on the basis of units produced in a year. This method is suitable when a company has fluctuating productive rate. The formula to calculate the depreciation expense under this method is as follows:
To Discuss: The accounting treatment of the depletion and depreciation on the mine and mining facilities and equipment.
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Intermediate Accounting, 10 Ed
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