WD Mining Company purchased a section of land for $600,000 in 2002 to develop a zinc mine.
Question:
WD Mining Company purchased a section of land for $600,000 in 2002 to develop a zinc mine. The mine began operating in 2004. At that time, management estimated that the mine would produce 200,000 tons of quality ore. A total of 100,000 tons of ore was mined and processed from 2004 through December 31, 2011. During January 2012, a very promising vein was discovered. The revised estimate of ore still to be mined was 250,000 tons. Estimated salvage value for the mine land was $100,000 in both 2004 and 2012. Assuming that 10,000 tons of ore was mined in 2012, the computation WD Mining Company should use to determine the amount of depletion to record in 2012 would be
a. (($600,000 2-$100,000)/450,000 tons) × 10,000 tons.
b. (($600,000 2-$100,000)/350,000 tons) × 10,000 tons.
c. (($600,000 2-$100,000-$250,000)/350,000 tons) × 10,000 tons.
d. (($600,000 2-$100,000-$250,000)/250,000 tons) × 10,000 tons.
Intermediate Accounting
ISBN: 978-0324312140
16th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen