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
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- Underwoods Miners recently purchased the rights to a diamond mine. It is estimated that there are two million tons of ore within the mine. Underwoods paid $46,000,000 for the rights and expects to harvest the ore over the next fifteen years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 900,000 tons Year 3: 400,000 tons Year 4: 210,000 tons Year 5: 150,000 tons Calculate the depletion expense for the next five years and create the journal entry for year one.arrow_forwardKhamsah Mining Company has purchased a tract of mineral land for $900,000. It is estimated that this tract will yield 120,000 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that 6,000 tons of ore will be mined the first and last year and 12,000 tons every year in between. (Assume 11 years of mining operations.) The land will have a salvage value of $30,000. The company builds necessary structures and sheds on the site at a cost of $36,000. It is estimated that these structures can serve 15 years but, because they must be dismantled if they are to be moved, they have no salvage value. The company does not intend to use the buildings elsewhere. Mining machinery installed at the mine was purchased secondhand at a cost of $60,000. This machinery cost the former owner $150,000 and was 50% depreciated when purchased. Khamsah Mining estimates that about half of this machinery will still be useful when the present mineral resources…arrow_forwardWittwater Mining ple has bought mine where it plans to extract gravel for use in the construction industry. The mine is expected to supply gravel for five years and then be sold. The following figures are estimated for future five years: • The initial cost of the mine and the equipment is $2 000 000, and on the last day of year five, the mine and equipment will be sold for $1 800 000. The Wittwater Mining ple use the straight-line method to charge depreciation for mine and equipment, the depreciation rate is 20%. In year 1, sales will be 180 tons of gravel per week, at a price of S20 per ton. In years 2 and 3, sales will be 190 tons of gravel per week, at a price of $21 per ton. In years 4 and 5, sales will be 170 tons of gravel per week, at a price of $22 per ton. In years 1 and 2, the running costs (including depreciation) are expected to be S2 000 a week. • In years 3 and 4, the running costs (including depreciation) are expected to be S2 200 a week. In year 5, the running costs…arrow_forward
- Grey Mining Company has purchased a tract of mineral land for $1,200,000. It is estimated that this tract will yield 80,000 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that 4,000 tons of ore will be mined the first and last year and 8,000 tons every year in between. (Assume 11 years of mining operations.) The land will have a residual value of $80,000. The company builds necessary structures and sheds on the site at a cost of $134,000. It is estimated that these structures can serve 16 years but, because they must be dismantled if they are to be moved, they have no salvage value. The company does not intend to use the buildings elsewhere. Mining machinery installed at the mine was purchased at a cost of $150,000. Grey Mining estimates that about half of this machinery will still be useful when the present mineral resources have been exhausted but that dismantling and removal costs will just about offset its value at…arrow_forwardSunland Mining Company has purchased a tract of mineral land for $1,134,000. It is estimated that this tract will yield 151,200 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that 7,560 tons of ore will be mined the first and last year and 15,120 tons every year in between. (Assume 11 years of mining operations.) The land will have a salvage value of $37,800.The company builds necessary structures and sheds on the site at a cost of $45,360. It is estimated that these structures can serve 15 years but, because they must be dismantled if they are to be moved, they have no salvage value. The company does not intend to use the buildings elsewhere. Mining machinery installed at the mine was purchased secondhand at a cost of $75,600. This machinery cost the former owner $189,000 and was 50% depreciated when purchased. Sunland Mining estimates that about half of this machinery will still be useful when the present mineral…arrow_forwardMarigold Mining Company has purchased a tract of mineral land for $972,000. It is estimated that this tract will yield 129,600 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that 6,480 tons of ore will be mined the first and last year and 12,960 tons every year in between. (Assume 11 years of mining operations.) The land will have a salvage value of $32,400. The company builds necessary structures and sheds on the site at a cost of $38,880. It is estimated that these structures can serve 15 years but, because they must be dismantled if they are to be moved, they have no salvage value. The company does not intend to use the buildings elsewhere. Mining machinery installed at the mine was purchased secondhand at a cost of $64,800. This machinery cost the former owner $162,000 and was 50% depreciated when purchased. Marigold Mining estimates that about half of this machinery will still be useful when the present mineral…arrow_forward
- Choice Mining Company has purchased a tract of mineral land for $4,500,000. It is estimated that this tract will yield 120,000 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that 6,000 tons of ore will be mined the first and last year and 12,000 tons every year in between. (Assume 11 years of mining operations.) The land will have a residual value of $150,000.The company builds necessary structures and sheds on the site at a cost of $180,000. It is estimated that these structures can serve 15 years. But, because they must be dismantled if they are to be moved, they have no residual value. The company does not intend to use the buildings elsewhere. Mining machinery installed at the mine was purchased secondhand at a cost of $300,000. This machinery cost the former owner $750,000 and was 50% depreciated when purchased. Choice Mining estimates that about half of this machinery will still be useful when the present mineral…arrow_forwardGomez Corporation purchased land for P 6,000,000. The company expected to extract 1,000,000 tons of mine from this land over the next 20 years at which time, the residual value will be zero. During the first 2 years of the mine’s operations,30,000 tons were mined each year and sold for P 80 per ton. The estimate of the total lifetime capacity of the mine was raise to 1,200,000 tons at the start of the 3rd year and the residual value was estimated to be P 480,000. During the third year, 50,000 tons were mined and sold for P 85 per ton. How much would be the depletion for the third year? a. 215,000 c. 225,000 b. 227,500 d. 235,000arrow_forwardA coal company invests $10 million in a mine estimated to have 15 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, 1140000 tons of coal are extracted and sold. What is the depletion expense for the first year?arrow_forward
- The Weber Company purchased a mining site for $1,750,000 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 400,000 tons will be recovered. The estimated residual value of the property is $150,000. During the first year, the company extracted 6,500 tons of ore. The depletion expense is $26,000 $15,000 $16,000 $17,500arrow_forwardTen investors invested an amount of P 75 million each for coal mining at Sierra Madre Mountain. It is expected that the mine contains 5, 000, 000 tons of coal ores and due to latest technology, it can mine 125, 000 tons of unprocessed ores. The management expects an annual expenses of P 35 million, an annual miscellaneous expenses of P 12 million and milling, drilling and other procedural expenses yearly costs P 815 per ton of unprocessed ores of coal. After such process, 85% of the coal ores produces an income of P 1, 750 per ton. a) Find the annual depletion cost of the mine. b) Ten years after operation, the management annual expenses decreases an amount of P 4 million, annual miscellaneous expenses becomes P13 million and procedural expenses becomes P 920 per ton of unprocessed ores. After procedural process, 75% of unprocessed ores produces an income of P 1, 850 per ton. What would then be its average depletion cost annually for the remaining years of the mine?arrow_forwardYour mining company is considering an expansion of operations into iron ore. Your engineers surveyed a particular piece of land three weeks ago (the survey cost $25,000) and concluded the following: • You can extract 1,000 tons of iron ore per year. • There are 4,000 tons of iron ore underneath this land. Once all the ore has been extracted, the project will cease to produce any revenues. • The price of ore will remain constant for the next 4 years. Currently ore sells for $100 per ton. • The operating cost to extract the ore will be $60 per ton for the next 4 years. . • We will need to invest in the equipment for this project right now for $100,000. . mention The equipment will be depreciated over a period of four years using the straight-line method, with an assumed salvage value of zero for tax purposes. At the end of year 4, we can sell the equipment involved in the project for $20,000. The expansion requires additional working capital (NWC) of $10,000 from the start (at time t=0)…arrow_forward
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