Depletion Expense
In 2004,Heslop Mining Company purchased property with natural resources for $5,400,000. The property was relatively close to a large city and had an expected residual value of $700,000.
The following information relates to the use of the property:
(a) In 2004,Heslop spent $300,000 in development costs and $500,000 in buildings on the property. Heslop does not anticipate that the buildings will have any utility after the natural resources are depleted.
(b) In 2005 and 2007,$200,000 and $700,000,respectively,were spent for additional developments on the mine.
(c) The tonnage mined and estimated remaining tons for years 2004–2008 are as follows:
|
Year |
Tons Extracted |
Estimated Tons Remaining |
|
2004 |
0 |
4,000,000 |
|
2005 |
1,200,000 |
2,800,000 |
|
2006 |
1,100,000 |
1,800,000 |
|
2007 |
800,000 |
900,000 |
|
2008 |
900,000 |
0 |
Instructions: Compute the depletion and depreciation expense for the years 2004–
2008.