In 2018, the Marion Company purchased land containing a mineral mine for $1,950,

Question

In 2018, the Marion Company purchased land containing a mineral mine for $1,950,000. Additional costs of $792,000 were incurred to develop the mine. Geologists estimated that 470,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $110,000. To aid in the extraction, Marion built various structures and small storage buildings on the site at a cost of $192,700. 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 $84,900 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 $5,000 after the mining project is completed. n 2018, 57,000 tons of ore were extracted and sold. In 2019, the estimate of total tons of ore in the mine was revised from 470,000 to 557,500. During 2019, 87,000 tons were extracted, of which 67,000 tons were sold. Required: 1. Compute depletlon and depreclatlon of the mine and the mining facllities and equipment for 2018 and 2019. Marlon uses the unlts- 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. (Do not round intermediate calculations.) 2018 2019 Depletion of mineral mine Depreciation of structures Depreciation of equipment

Explanation / Answer

Land: Total cost of Land (1950000+792000) 2742000 Less: Resale value 110000 Depletion cost 2632000 Divide: Number of tonnes f output 470000 Depletion expense per tonne produced 5.6 Year-2018 Number of tonnes produced 57000 Depletion rate per tonne 5.6 Depletion expense for 2018 319200 Year2019 Remaining Depletion cost (2632000-319200) 2312800 Divide: Revised remaining ores (557500-57000) 500500 Depletion expense per tonne 4.62 Number of tonnes extracted 87000 Depletion expense for 2019 401940 Structure: Total cost of Structure 192700 Divide: Number of tonnes of output 470000 Depletion expense per tonne produced 0.41 Number of tonnes produced 57000 Depletion expense for 2018 23370 Year2019 Remaining cost (192700-23370) 169330 Divide: Revised tonnes (557500-57000) 500500 Depletion expense per tonne 0.3383 Number of t onnes extracted 87000 Depletion expense for 2019 29432 Equipment: Total cost of Equipment 84900 Less: Resale value 5000 Depreciable cost 79900 Divide: Number of tonnes f output 470000 Depreciation expense per tonne produced 0.17 Year-2018 Number of tonnes produced 57000 Depreciation rate per tonne 0.17 Depreciation expense for 2018 9690 Year2019 Remaining Depreciable cost -(84900-9690) 75210 Divide: Revised remaining ores (557500-57000) 500500 Depreciation expense per tonne 0.15 Number of tonnes extracted 87000 Depreciation expense for 2019 13050 Req 2. Book value of Each assets at the end of 2019 Land: 2742000 Less: Accumulated depreciation 721140 (319200+401940) Book value f Land 2020860 Structure: 192700 Less: Accumulated depreciation 52802 (23370+29432) Book value of Structure 139898 Equipment 84900 Less: Accumulated dep 22740 (9690+13050) Book value of Equipment 62160

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