# compute and record depletion of natural resources

mayfair mining company had a total depletable capitalized cost of 656,000 for a mine acquired in early 2013. It was estimated that the mine contained 820,00 tons of recoverable ore when production began. During 2013, 20,500 tons were mined, and 41,00 tons were mined in 2014. What would be teh amount of cost depletion allowable for tax purpose in 2031, assuming that capitalized mineral cost are the same tax purpose as for financial accounting purpose?

 paraclete Posts: 1,882, Reputation: 590 Ultra Member #2 Aug 25, 2012, 03:40 PM
simple proportion you are given the estimated tonnage of ore and the production quantities. You are also given the establishment cost of the mine, you will therefore amortise the cost of the mine using these values. I suggest you learn to express quantities properly, taken at face value and commas removed the ore body is more than 50 % depleted and at this rate there will be no ore body in 2031
 petronia85 Posts: 1, Reputation: 1 New Member #3 Feb 23, 2013, 03:41 PM
Mayfair mining company had total capitalization cost of 656,000 for a mine acquired in early 2010. It was Estimated that the mine contained 820,000 tons of recoverble ore when production began. During 2010, 20,500 tons were mined, and 41,000 were mined in 2011.

Instructions
1. Compute the depletion expense in 2010 and 2011 for financialaccounting purposes. What accounts will be debited and credited to record the depletion?

2 a. In 2010 20,500 tons of ore were sold for 2,050,000. For tax purposes, operating expenses of the mine were 500,000. The taxpayer may deduct either cost depletion or percentage depletion, which for the type ore produced is 8 percent of production sold from the mine. (Assume, however, that percentage depletion is limited to the amount of net income from the property.) What would be the amount of percentage depletion allowable in 2010?

b. What would be the amount of cost depletion allowable for tax purposes in 2010, assuming that capitalized mineral costs are the same for tax purposes as for financial accounting purposes?

Other Math