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28 February, 01:28

In April 2013, Sparkle Enterprises purchased the Crimson Mine at a cost of $18,000,000. The mine is estimated to contain 500,000 tons of ore with a residual value of $2,000,000 after mining operations are completed. During 2013, 120,000 tons of ore were removed from the mine and sold. In this situation:

a. The book value of the mine is $16,000,000 at the end of 2013.

b. The amount of depletion deducted from revenue during 2013 is $3,840,000.

c. The amount of depletion deducted from revenue during 2013 is $2,000,000.

d. The mine is classified as an intangible asset with in indefinite life and is not amortized.

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  1. 28 February, 03:11
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    The correct answer is B.

    Explanation:

    Giving the following information:

    In April 2013, Sparkle Enterprises purchased the Crimson Mine for $18,000,000. The mine is estimated to contain 500,000 tons of ore with a residual value of $2,000,000 after mining operations are completed. During 2013, 120,000 tons of ore were removed from the mine and sold.

    Annual depreciation = [ (original cost - salvage value) / useful life of production in units]*units produced

    Annual depreciation = (16,000,000/500,000) * 120,000 = $3,840,000
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