Question: Leziy Corporation owns a coal mine an oil field and

Leziy Corporation owns a coal mine, an oil field, and a tract of timberland. Information regarding these assets follows:
1. The coal mine was purchased several years ago at a total cost of $ 865,000. The mine was esti-mated to contain 200,000 tons of ore and to have a $ 35,000 salvage value. During the current year, 53,000 tons of ore were mined.
2. The oil field was acquired in exchange for stock and was initially valued at $ 12,600,000. It was estimated to contain 500,000 barrels of oil and to have a salvage value of $ 100,000. During the cur-rent year, 127,000 barrels of oil were extracted.
3. The timberland was obtained through a land swap and was initially recorded at $ 1,350,000. The number of board feet of timber estimated to be available amounted to 120,000, and the salvage value of the land was estimated at $ 150,000. During the current year, 21,000 board feet of timber were cut.
A. Assuming Leziy uses the units-of-production method of depletion, determine the depletion rate per ton, barrel, and board foot.
B. Compute the amount of depletion for each of the assets for the current year.
C. Will the depletion charge appear on the financial statements as depletion expense? If not, where will it most likely appear?

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  • CreatedMarch 25, 2015
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