On December 31, 2019, a gold mining company purchased mineral rights for $4,400,000. An additional $3,100,000 was
Question:
On December 31, 2019, a gold mining company purchased mineral rights for $4,400,000. An additional $3,100,000 was spent developing the mine. The mine is expected to remain open for the next 22 years with a total estimated output of 2,850,000 ounces of silver. At the end of its useful life, the mine will have to be decommissioned at an expected cost of $2,600,000. The relevant discount rate is 7%.
The company uses the units of production method of depreciation. The silver output in 2020 was 74,000 ounces.
Required –
a) Prepare all journal entries for the years ended Dec 31, 2019 and 2020.
b) The mining operations ceased on December 31, 2031.
A total of 2,400,000 ounces of silver was mined to the end of December 31, 2030. A total of 190,000 ounces were mined during the year ended December 31, 2031. Write all journal entries at December 31, 2031.
Expert Answer:
Amount paid for mineral Right 4400000 Additional development cost 3100000 Decommissioning Cost 26000... View the full answer
