Question

In 2018, the Marion Company purchased land containing a mineral mine for $1,660,000. Additional costs of $723,000 were incurred to develop the mine. Geologists estimated that 700,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $108,000. To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $455,000. These structures have a useful life of 10 years. The structures cannot be moved after the ore has been removed and will be left at the site. In addition, new equipment costing $93,000 was purchased and installed at the site. Marion does not plan to move the equipment to another site, but estimates that it can be sold at auction for $2,000 after the mining project is completed. In 2018, 56,000 tons of ore were extracted and sold. In 2019, the estimate of total tons of ore in the mine was revised from 700,000 to 966,000. During 2019, 93,000 tons were extracted. Required: 1. Compute depletion and depreciation of the mine and the mining facilities and equipment for 2018 and 2019. Marion uses the units- of-production method to determine depreciation on mining facilities and equipment. 2. Compute the book value of the mineral mine, structures, and equipment as of December 31, 2019. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute depletion and depreciation of the mine and the mining facilities and equipment for 2018 and 2019. Marion uses the units-of-production method to determine depreciation on mining facilities and equipment. (Round the intermediate calculation to 3 decimal places.) 2018 2019 Depletion Depreciation for Structures Depreciation for Equipment Required 1 Required 2 >

Answer 1

page: 01 -Answer marion company contains mineral mine = $ 1660000 -Additional costs = $ 12.3000 estimated gje = 400000 tons resale value = $ 108 000 site cost = $455000 useful life - 10 years equipment cost = [93000 site sold at auction = $ 2000, ore extracted and sold - 56000 tons. castimaled ore = 7000uo to 966000 (2019) extsouted (2019) = 93000 tons. Required © depletion of mine. purchase price = $ 1660000 Additional cost = '$ 42.3000 Total = $ 1660000 + $ 723000

= $ 2383000 page:02 less ; Salvage Value = 108,000 depareciable cose - Total cost- salvage value = $2383000 - $ 108000 = $ 2245000 divided by : tons of ore = 400,000 depedión per ton - depreciable. cost tons of ore $ 2275000 700,000 3.25 depletion for 2018 ( 56000 x 3.025) , 182000 Total cost = $ 2383000 lessi depletion for 2018 - 182000 Remaining value = 0383000 -182000 .9901000 less : Salvage value = 108,000

page:03 Remaining depseilable cost = Renaining value - Salvage value 2201 000 - 108000 = 2093000 divided by: Remaining tons of ore = 966000 - 56000 910000 kin Revited depletion per ton = Remaining deporeliable cost Remaing tons of ore 2093000 910000 910000 = 2.3 depletion for 2011( 93000 42,3) = $/3900) depreciation for street tevres cost of structure = 1660000 . divided by :- tons of ore = 700,000 · cost of structwies depredation for structure per tossa tors of ore . .

1660000 page:04 700000 = 2.371428571 depredation for structure 2018 ( 56000 *, 37142857) = 132800 Cost structure - 7660000 depreciation for structure 2018 - 132800 Remaining depredable cost = 1660000 – 132800 = 152-7200 Remaining tons of ore ( 266000 = 56000) = 910000 Reupscor depreciation for structures per for = Remaining deporeciable cost Remaining tons of one 1529200 910000 = 1,678241458 depreciation for structure P019( 93000 x1.648241758) =456076.4835

depreciation for equipment page:05 cost of equipment = $ 93000 Salvage rallel = $ pool depreciable cost - 93000 - 2000 91000 tons of ore - 700,000 depreciation for equipment per ton depreciable cost fons of ore 91000 700000 =013 depreciation for equipment for 2018 ( 56000 X013)7280 cost of equipment = $ 93000 depreứation for equipment for 2018 = 4280 Remaining value - 93000 - 7280 = 85720 Salvage value = { 2000 Remaining depreciable cosé - Remaining value- a salvage value 8 5720 - 2000

= 83720 page : 06 Remaining tons of ore ( 966000 - 56000) = 910000 Revised depreuation for equipment per ton Remaining depreciable est . Remaining tons of ore . ---- 83720 910000 = 0.092 depreuation 107 equipment pol9/93000 20.092) = 6556 @ depneuation depletion for 2018 = 189000 (mine) depreủation for 2019 = 2943900 ( mine) Accumulated depoređation / depletion at end of 2019 'Total = 182000 + 213900 = 395900 - original cost of assets - $ 0383000 accumulated depreciation depletion at end of 2019 << $ 395900

page :07 Book value of assets = 2383000 - 395900 = 1987100 ( mine) Structures depreciation f87 2018 = 132800 deprecation for 2019 = 156076.4835 Accumulated deprecation at end of 2019 = 1328007 156076.4835 = 288876.4835 original cost f assets = 455000 A cetemu lated deprecation at end of 2019 = 288816,4835 Book value of assets = 455000 - 288876.4835 7. [66123.5165 (structures) Equipment depreciation for 2018 - 9280 depreciation 181 2019 = 8556 Accumulated deprecation at end of 2019 = -428048556 - 15836 Original cost of anets = 93000

page2o8 Accumulated depreciation at end 2019 = 15836 Book value of assets = 93000 - 15836 = 77164 ( equipment)