Solution to intermediate accounting 12th edition?

Answer 1

Khamsah Mining Company has purchased a tract of

mineral land for $900,000. It is estimated that this tract will yield 120,000 tons of ore with sufficient mineral

content to make mining and processing profitable. It is further estimated that 6,000 tons of ore will

be mined the first and last year and 12,000 tons every year in between. (Assume 11 years of mining

operations.) The land will have a residual value of $30,000.

The company builds necessary structures and sheds on the site at a cost of $36,000. It is estimated

that these structures can serve 15 years but, because they must be dismantled if they are to be moved,

they have no salvage value. The company does not intend to use the buildings elsewhere. Mining machinery

installed at the mine was purchased secondhand at a cost of $60,000. This machinery cost the

former owner $150,000 and was 50% depreciated when purchased. Khamsah Mining estimates that about

half of this machinery will still be useful when the present mineral resources have been exhausted but

that dismantling and removal costs will just about offset its value at that time. The company does not intend

to use the machinery elsewhere. The remaining machinery will last until about one-half the present

estimated mineral ore has been removed and will then be worthless. Cost is to be allocated equally between

these two classes of machinery.

Instructions

(a) As chief accountant for the company, you are to prepare a schedule showing estimated depletion

and depreciation costs for each year of the expected life of the mine.

(b) Also compute the depreciation and depletion for the first year assuming actual production of 5,000

tons. Nothing occurred during the year to cause the company engineers to change their estimates

of either the mineral resources or the life of the structures and equipment.

Answer 2

Solutions to problems in books such as Intermediate Accounting, 12th edition, are usually provided only to teachers. To get the answers for this book, it is necessary to purchase the Instructor's edition from the publishing company or school book supplier.