Kelly Company acquired an iron mine for $2,349,000. Kelly paid a $1,000 filing fee with the county recorder, $50,000 license fee to the state, and $100,000 for a geologic survey. It was estimated that the land would have a value of $400,000 after completion of the mining operations, and that 1,000,000 tons of iron ore could be extracted from the mine. During the first year of operations, 100,000 tons of iron ore were extracted and 80,000 tons of iron ore were sold for $5 per ton. How much gross profit is shown on the Income Statement for the current period? What is the amount of depletion to record in the current period?
Kelly Company acquired an iron mine for $2,349,000. Kelly paid a $1,000 filing fee with the county recorder, $50,000 license fee to the state, and $100,000 for a geologic survey. It was estimated that the land would have a value of $400,000 after completion of the mining operations, and that 1,000,000 tons of iron ore could be extracted from the mine. During the first year of operations, 100,000 tons of iron ore were extracted and 80,000 tons of iron ore were sold for $5 per ton. How much gross profit is shown on the Income Statement for the current period? What is the amount of depletion to record in the current period?
Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion
Section: Chapter Questions
Problem 56P
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Kelly Company acquired an iron mine for $2,349,000. Kelly paid a $1,000 filing fee with the county recorder, $50,000 license fee to the state, and $100,000 for a geologic survey. It was estimated that the land would have a value of $400,000 after completion of the mining operations, and that 1,000,000 tons of iron ore could be extracted from the mine. During the first year of operations, 100,000 tons of iron ore were extracted and 80,000 tons of iron ore were sold for $5 per ton.
How much gross profit is shown on the Income Statement for the current period?
What is the amount of depletion to record in the current period?
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