McManus Mining Inc., headquartered in Phoenix, Arizona, is \"a premier U.S.-base

Question

McManus Mining Inc., headquartered in Phoenix, Arizona, is "a premier U.S.-based natural resource company with an industry leading global portfolio of mineral assets, significant oil and natural gas resources and a growing production profile." At the end of a recent year, its assets include approximately 104 billion pounds of copper, 29 million ounces of gold, 3 billion pounds of molybdenum, 283 million ounces of silver, 860 million pounds of cobalt, and 390 million barrels of estimated oil and natural gas reserves. Its annual revenues exceed $21.4 billion. Assume that in February 2016, McManus Mining paid $712,000 for a mineral deposit in Indonesia. During March, it spent $211,140 in preparing the deposit for exploitation. It was estimated that 914,000 total cubic yards could be extracted cconomically. During 2016, 64,000 cubic yards werc extracted. During January 2017, the company spent another $10,000 for additional developmental work that incrcased the estimated productive capacity of the mincral deposit. Required: 1. Compute the acquisition cost of the deposit in 2016. 2. Compute depletion for 2016. (Do not round intermediate calculations.) 3. Compute the net book value of the deposit after payment of the January 2017 developmental costs.(Do not round intermediate calculations.) value

Explanation / Answer

Computation of acquisition cost the deposit in 2016 Particular Amount Purchase Price paid in Indonesia for Mineral Deposit $712,000 Amount Spend in march in exploitation $211,140 Acquisition Cost of Mineral deposit $923,140 Computation of Depletion for 2016 Particular Amount Accquisition cost of Mineral Deposit $923,140 Estimated cubic yards extractable 914000 Actual Extracted in 2016 (in cubic yards)           64,000 depletion in 2016 (64000/914000)*$923140) 64640 Computation of net Book Value after payment of developmental money Particular Amount Total acquisition cost $861,650 $923,140 Depletion of 2016 $73150 -$64,640 Development Money Paid $10,000 Book Value $868,500

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