Stillwell Industries acquired a tract of land containing Taconite on July $1,2022$ for

$$18,000,000.$ A condition of the purchase contract is that Stillwell must restore the land to a condition suitable for recreational use after it has extracted the Taconite. The estimated restoration costs on July $1,2022$ is $$1,500,000.$ Geological surveys estimate that the recoverable ore will be $40,000,000$ tons, and that the land will have a value of $$1,000,000$ after restoration. Stillwell estimates that mining operations will take $60$ years to extract all economically recoverable ore on the land once mining operations begin.

A fleet of heavy$-$duty pickups was purchased to support mine personnel in mine operations. The pickups cost $$1,300,000$ on January $30,2024.$ The seller estimated that the pickups would have a physical life of $8$ years and would be expected to be driven $25,000$ miles each year.

Stillwell management expects to replace the pickups in $5$ years to save on the expected increased maintenance costs during years $6$ through $8.$ The company expects the pickups to be driven $100,000$ miles over the $5$ years and expects to extract $2,000,000$ tons of ore in that time period.

Mining operations began on May $1,2024.$ Production and sales data for the first two years of mine operations are

$20242025$

Taconite mined and processed $($tons$)300,000410,000$

Taconite sold $($tons$)160,000425,000$

Required:

A$)$ Determine the amount of depletion cost to be charged against income for the fiscal year ended December $31,2024.$ Explain all judgments used to arrive at this cost.

B$)$ Determine the depreciation expense on the pickup trucks for the fiscal year ended December $31,2025.$ Explain all judgments used to arrive at this expense.

Answer rating: 100% (QA)

Stillwell Industries Accounting Questions A Depletion Cost for 2024 Heres how to determine the depletion cost for the fiscal year ended December 31202... View the full answer