In 2010, Silverspur Mining Inc

question 52

Essay

In 2010, Silverspur Mining Inc. purchased land for $5,600,000 that had a natural resource supply estimated at 4,000,000 tons. When the natural resources are removed, the land will have an estimated value of $640,000. The present value of the expected cash outflows for the required restoration cost for the property is estimated to be $800,000.
Development and road construction costs on the land were $560,000, and a building was constructed at a cost of $88,000 with an estimated $8,000 salvage value when all the natural resources have been extracted.
During 2011, additional development costs of $272,000 were incurred, but additional resources were not discovered. Production for 2010 and 2011 was 700,000 tons and 900,000 tons, respectively.
Compute the depletion charge for 2010 and 2011. (Include depreciation on the building, if any, as a depletion charge.) Round depletion charge to the nearest cent.

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