Change in Estimated Units of Production
On January 1 of Year 1, the company purchased a mine for $150,000. At that time, it was estimated that the mine contained 2,000 tons of ore. During Year 1, the company extracted 900 tons of ore from the mine. On January 1 of Year 2,the company spent $60,000 on mine improvements. During Year 2, the company extracted 600 tons of ore. On December 31 of Year 2, it was estimated that the mine contained 700 tons of ore. Compute depletion expense for (1) Year 1 and (2) Year 2.
Q675
Determining Whether a Tangible Asset Is Impaired
The cost and the accumulated depreciation for a piece of equipment are $1,500,000 and $600,000,respectively.Management is concerned that the equipment has become impaired. Management hired several independent appraisers who agreed that the current value of the equipment is $500,000. Management also estimates that the equipment will generate cash inflows of $65,000 per year for the next 14 years. Is the equipment impaired? Explain.