Required information For the last 10 years, Am-Mex Coal has used the cost depletion factor of $2,500 per 100 tons to write off the investment of $38 million in its Pennsylvania anthracite coal mine. Depletion thus far totals $24.8 million. A new study to appraise mine reserves indicates that no more than 910,000 tons of salable coal remains. The estimated gross income is expected to be $8.8 million on a production level of 72,000 tons. NOTE: This is a multi-part question. Once an answer is submitted, you will be unable to return to this part. Determine next year's depletion amount. The percentage depletion allowance is 10%. (Enter your answer in dollars and not in millions.)

Required information For the last 10 years, Am-Mex Coal has used the cost depletion factor of $2,500 per 100 tons to write off the investment of $38 million in its Pennsylvania anthracite coal mine. Depletion thus far totals $24.8 million. A new study to appraise mine reserves indicates that no more than 910,000 tons of salable coal remains. The estimated gross income is expected to be $8.8 million on a production level of 72,000 tons. NOTE: This is a multi-part question. Once an answer is submitted, you will be unable to return to this part. Determine next year's depletion amount. The percentage depletion allowance is 10%. (Enter your answer in dollars and not in millions.)

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 6PA: Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one...

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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.
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 journal entry for year one.
Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. With DEPREC5 still on the screen, click the Chart sheet tab. This chart shows the accumulated depreciation under all three depreciation methods. Identify below the depreciation method that each represents. Series 1 _____________________ Series 2 _____________________ Series 3 _____________________ When the assignment is complete, close the file without saving it again. Worksheet. The problem thus far has assumed that assets are depreciated a full year in the year acquired. Normally, depreciation begins in the month acquired. For example, an asset acquired at the beginning of April is depreciated for only nine months in the year of acquisition. Modify the DEPREC2 worksheet to include the month of acquisition as an additional item of input. To demonstrate proper handling of this factor on the depreciation schedule, modify the formulas for the first two years. Some of the formulas may not actually need to be revised. Do not modify the formulas for Years 3 through 8 and ignore the numbers shown in those years. Some will be incorrect as will be some of the totals. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as DEPRECT. Hint: Insert the month in row 6 of the Data Section specifying the month by a number (e.g., April is the fourth month of the year). Redo the formulas for Years 1 and 2. For the units of production method, assume no change in the estimated hours for both years. Chart. Using the DEPREC5 file, prepare a line chart or XY chart that plots annual depreciation expense under all three depreciation methods. No Chart Data Table is needed; use the range B29 to E36 on the worksheet as a basis for preparing the chart if you prepare an XY chart. Use C29 to E36 if you prepare a line chart. Enter your name somewhere on the chart. Save the file again as DEPREC5. Print the chart.
Urquhart Global purchases a building to house its administrative offices for $500,000. The best estimate of the salvage value at the time of purchase was $45,000, and it is expected to be used for forty years. Urquhart uses the straight-line depreciation method for all buildings. After ten years of recording depreciation, Urquhart determines that the building will be useful for a total of fifty years instead of forty. Calculate annual depreciation expense for the first ten years. Determine the depreciation expense for the final forty years of the assets life, and create the journal entry for year eleven.
Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new design will eliminate the production of a toxic solid residue. The initial cost of the system is estimated at 860,000 and includes computerized equipment, software, and installation. There is no expected salvage value. The new system has a useful life of 8 years and is projected to produce cash operating savings of 225,000 per year over the old system (reducing labor costs and costs of processing and disposing of toxic waste). The cost of capital is 16%. Required: 1. Compute the NPV of the new system. 2. One year after implementation, the internal audit staff noted the following about the new system: (1) the cost of acquiring the system was 60,000 more than expected due to higher installation costs, and (2) the annual cost savings were 20,000 less than expected because more labor cost was needed than anticipated. Using the changes in expected costs and benefits, compute the NPV as if this information had been available one year ago. Did the company make the right decision? 3. CONCEPTUAL CONNECTION Upon reporting the results mentioned in the postaudit, the marketing manager responded in a memo to the internal audit department indicating that cash inflows also had increased by a net of 60,000 per year because of increased purchases by environmentally sensitive customers. Describe the effect that this has on the analysis in Requirement 2. 4. CONCEPTUAL CONNECTION Why is a postaudit beneficial to a firm?
For the last 10 years, Am-Mex Coal has used the cost depletion factor of $2500 per 100 tons to write off the investment of $35 million in its Pennsylvania anthracite coal mine. Depletion thus far totals $24.8 million. A new study to appraise mine reserves indicates that no more than 800,000 tons of salable coal remains. Determine next year’s cost and percentage depletion amounts, if estimated gross income is expected to be between $6.125 and $8.50 million on a production level of 72,000 tons.
A coal mine cost $1,004,000 and is estimated to hold 58,000 tons of coal. There is no residual value. During the first year of operations, 11,000 tons are extracted and sold. Calculate depletion per unit. (Round your answer to the nearest cent.)
The Weber Company purchased a mining site for $510,498 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 82,226 tons will be recovered. During the first year the company extracted 6,000 tons of ore. The depletion expense is a.$46,488.30 b.$45,615.00 c.$37,260.00 d.$33,922.34
one of the largest mining company, purchased 20 acres of land for P60,000,000 in 2010. The company expected to extract 5 million tons of mine from this land over the next 20 years at which time, residual value shall be P3,000,000. The following costs were also incurred related to the mining activities during 2010: Successful exploration cost, P5,000,000 and cost of P800,000 for dry wells. Operations started in the year 2011, during the first 2 years of the mine’s operations, 300,000 tons and 400,000 tons were mined and sold for P80 per ton.Required:a) Entries to record the purchase of the land and other costs related to the mining activities in the year 2010.b) Entries to record the depletion expense for the year 2011 and 2012.
Vesco Mineral Resources purchased mineral rights to land in the foothills of the Santa Cristo mountains. The cost of the purchase was $9 million. Vesco originally estimated that 200,000 tons of lignite coal was removable. However, further exploration during the second year of operation revealedthat a total of 280,000 tons could be economically removed. If the company sold 20,000 tons in year 1 and 30,000 tons in year 2, what are the depletion charges each year according to the cost depletion method?
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 $17,500