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In 2008, Sunbeam Corporation acquired a silver mine in eastern Alaska. Because the mine is located deep in the Alaskan frontier, Sunbeam was able to acquire the mine for the low price of $50,000. In 2009, Sunbeam constructed a road to the silver mine costing $5,000,000. Improvements to the mine made in 2009 cost $750,000. Because of the improvements to the mine and to the surrounding land, it is estimated that the mine can be sold for $600,000 when mining activities are complete.

During 2010, five buildings were constructed near the mine site to house the mine workers and their families. The total cost of the five buildings was $1,500,000. Estimated residual value is $250,000. In 2008, geologists estimated 4 million tons of silver ore could be removed from the mine for refining. During 2011, the first year of operations, only 5,000 tons of silver ore were removed from the mine. However, in 2012, workers mined 1 million tons of silver. During that same year, geologists discovered that the mine contained 3 million tons of silver ore in addition to the original 4 million tons. Improvements of $275,000 were made to the mine early in 2012 to facilitate the removal of the additional silver. Early in 2012, an additional building was constructed at a cost of $225,000 to house the additional workers needed to excavate the added silver. This building is not expected to have any residual value.

In 2013, 2.5 million tons of silver were mined and costs of $1,100,000 were incurred at the beginning of the year for improvements to the mine.

1. Compute the depreciation and depletion charges for 2011, 2012, and 2013. Round your intermediate calculations to two decimal places, but round your final answers to the nearest whole dollar.

2. Give the journal entry to record the depreciation and depletion charges for 2013. If an amount box does not require an entry, leave it blank.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M948566

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