Fleetwood Corp purchased a mine in 2016 for $500,000 and estimated that 30,000 tons of iron ore could be extracted from it
There was no residual value. The business extracted and sold 2,500 tons of ore in 2016. How will the mine be reported on the balance sheet at the end of year 2016? (Round all intermediate calculations to the nearest cent.)
What will be an ideal response
Mine $500,000
Less: Accumulated depletion (41,675 ) $458,325 .Depletion per unit = (Cost - Residual value) / Estimated total units
Depletion per unit = ($500,000 - $0 ) / 30,000 = $16.67 per ton
Depletion expense = Depletion per unit x Number of units extracted
Depletion expense for year 2016 = $16.67 x 2,500 tons = $41,675
Book value of mine at the end of year 2016 = $500,000 - $41,675 = $458,325
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