Ask Question
1 April, 21:11

After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $60,000. The structures will be torn down. The mine is expected to produce 1,400,000 tons of ore. After the ore is removed, the land will revert back to the state of California. During 2021, Trevors extracted 210,000 tons of ore from the mine. What total amount would be charged to depletion of the mine and depreciation of the mining equipment and structures for 2021, assuming that Trevors uses the units-of-production method for both depletion and depreciation? (Round your final calculations to the nearest whole thousand dollars.)

+1
Answers (1)
  1. 2 April, 00:50
    0
    The total amount to be charged = $ (2520000+45000+36000) = $2601000.

    Explanation:

    Depletion of mineral mine:

    Purchase price = $12000000

    For the development cost = $4800000

    Total cost = $16800000

    Expected production = $1400000

    Cost per unit of activity = $ (16800000/1400000) = $12

    Activity during 2018 = 210000

    Depletion = 210000*$12 = $2520000.

    For the depreciation of mining equipment:

    Purchase price = $360000

    Less: Residual value = $60000

    Depreciable value = $300000

    Expected production = $1400000

    Cost per unit of activity = $ (300000/1400000) = $0.214286

    Activity during 2018 = 210000

    Depreciation = 210000*$0.214286 = $45000

    For the depreciation of Structures:

    Cost per unit of activity = $240000

    Expected production = $1400000

    Cost per unit of activity = $ (240000/1400000) = $0.171429

    Activity during 2018 = 210000

    Depreciation = 210000*$0.171429 = $36000.

    The total amount to be charged = $ (2520000+45000+36000) = $2601000.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $60,000. The structures will be ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers