Chapter 18 Problem 18-10
1. Purchase price 50,000
Road construction 5,000,000
Improvements and development costs 750,000
Total cost 5,800,000
Residual value ( 600,000)
Depletable cost 5,200,000
Depletion rate per unit (5,200,000 / 4,000,000) 1.30
Depletion for 2008 (500,000 x 1.30) 650,000
Depletable cost 5,200,000
Depletion in 2008 ( 650,000)
Remaining depletable cost 4,550,000
Development costs in 2009 1,300,000
Total depletable cost – 1/1/2009 5,850,000
Original estimated tons 4,000,000
Additional estimate 3,000,000
Total estimated tons 7,000,000
Extracted in 2008 ( 500,000)
Remaining tons – 1/1/2009 6,500,000
New depletion rate per unit (5,850,000 / 6,500,000) .90
Depletion for 2009 (1,000,000 x .90) 900,000
2. Cost of buildings 2,000,000
Residual value ( 200,000)
Depreciable cost 1,800,000
Depreciation rate per unit (1,800,000 / 4,000,000) .45
Depreciation for 2008 (500,000 x .45) 225,000
In the absence of any statement to the contrary, the output method is used in computing depreciation of mining equipment.
Depreciable cost 1,800,000
Depreciation for 2008 ( 225,000)
Remaining depreciable cost 1,575,000
Additional building in 2009 375,000
Total depreciable cost – 1/1/2009 1,950,000
New depreciation rate per unit (1,950,000 / 6,500,000) .30
Depreciation for 2009 (1,000,000 x .30) 300,000
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