Chapter 17.II, Problem 6RE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

All-That-Glitters Mining Company paid $49.250.000 for a parcel of land, including the gold mining rights. In addition, the company spent $7.462.500 to prepare the site for mining operations. It is estimated that the residual value of the asset will be $5.300.000. Geologists estimate the site contains a total of 225.000 ounces of gold.

a. What is the average depletion cost per ounce?

Total depletion = 49.250.000 + 7.462.500 - 5.300.000 = $51,412,500

Average depletion cost per ounce =

b. If 16,200 ounces were mined in the first year of operation, what is the amount of the depletion cost?

First-year depletion cost =

**(a)**

To determine

**To calculate:** The average depletion cost per ounce of parcel of land when the All-That-Glitters Mining Company paid

Explanation

**Given Information:**

The All-That-Glitters Mining Company paid

**Formula used:**

The average depletion cost per unit is:

**Calculation:**

Consider All-That-Glitters Mining Company paid

**(b)**

To determine

**To calculate:** The amount of depletion cost of first year when the All-That-Glitters Mining Company paid

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