On March 1, 2018, Maxus Energy acquired a gold mine for $29,000,000. At the time of acquisition, the Proven and Probable gold reserves of the mine were estimated to be 470,000 ounces. During the period March 2, 2018 through December 31, 2018, Maxus Energy incurred intangible development costs of $4,619,000; fixed tangible costs of $55,700; and exploration costs of $655,000. Maxus Energy has taken the position that the exploration costs are to be capitalized, rather than expensed. Maxus Energy estimates that future restoration costs will amount to $1,320,000 to be paid on the last day of the mine's estimated life (or December 31, 2029), and that the salvage value of the mine will be $1,130,000. In accordance with GAAP, Maxus Energy's management has determined the value of its asset retirement obligations using the Credit-Adjusted Risk-free Rate of 3 percent.

Following development, the 11-year life-of-mine asset was placed in service on January 1, 2019. Since that time, no additional development or exploration costs have been incurred. For all periods of operation through December 31, 2021, Maxus Energy extracted 188,000 ounces of the total estimated reserves. As of December 31, 2021, 9,400 of these ounces remained in inventory.

During December 2021, the price of gold dropped and is not expected to recover in the foreseeable future. Accordingly, on January 1, 2022, Maxus Energy tested whether or not the mine was impaired. After implementing every possible cost cutting measure, Maxus Energy was able to establish the following projected future cashflows for the remaining life of the mine. The company used these cashflows for calclulating the fair value of the mine:

Year 2022 net cash INFLOW of $4,439,000
Year 2023 net cash INFLOW of $8,149,000
Year 2024 net cash OUTFLOW of $(2,725,000)
Year 2025 net cash INFLOW of $8,912,000
Year 2026 net cash INFLOW of $2,279,000
Year 2027 net cash INFLOW of $3,196,000
Year 2028 net cash OUTFLOW of $(9,652,000)
Year 2029 net cash INFLOW of $2,981,000

All cashflows are deemed to occur at the end of each respective year. The restoration costs of $1,320,000 are included in the final net cashflow shown above. However, GAAP REQUIRES such costs to be EXCLUDED from future cash flows for purposes of determining the impairment of a long-lived asset. Thus, the final cash flow should be adjusted for this amount when determining the Net Present Value of the mine's future cash flows. The company uses a discount rate of 3 percent to determine the net present value of the mine's future cashflows.

In connection with the foregoing facts, answer the following questions:

- What is the total cost of the mine placed in service on January 1, 2019?

- Rounded to the nearest penny, what is the mine's depletion rate per ounce of gold extracted?

- Rounded to the nearest whole dollar, what is the total depletion expense that should have been recorded in Cost of Goods Sold for all periods through December 31, 2021?

- If impaired, what is the amount of the impairment loss that Maxus Energy should record on its investment in the mine on its 2022 income statement? (Note: If the mine is not impaired, enter 0).

Answer rating: 100% (QA)

Initial Capital Expense on 1 March 2018 29000000 Interest Rate per ... View the full answer