Frederick Mining Company owns a large parcel of land which costs $1,000,000

Accounting Nov 05, 2020

Frederick Mining Company owns a large parcel of land which costs $1,000,000. It is estimated to contain 1,500,000 tons of recoverable ore. It is estimated that the recovery of the ore will take 10 years and that after the ore is fully depleted the land will be sold for a market value of $150,000. In 2018, Frederick extracted and sold 145,000 tons of ore. What is the amount of depletion that should be recorded? Round total the nearest whole dollar.

Expert Solution

Answer:

Depletion to be recorded = $82167.

Explanation:

Cost of land = $1000000

Residual value = $150000

Total number of Tons expected = 1500000

Depletion rate = (Cost of land - Residual value) / Number of tons ore

= ($1000000 - $150000) / 1500000

= $850000 / 1500000

= $0.56667

Total Depletion in 2018 = 145000 x $0.56667 = $82167

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote