Weaver Mining Company Purchased a Site Containing a Mineral Deposit

question 31

Essay

Weaver Mining Company purchased a site containing a mineral deposit in 20C. The purchase price was $820,000, and the site is estimated to contain 400,000 tons of extractable ore. Weaver constructed a building at the site, at a cost of $500,000, to be used while the ore is being extracted. When the ore reserves are gone, the building will have no further value.
Required:
1. Explain the purpose for recording depletion on natural resources.
2. Calculate Weaver's depletion rate per ton of ore for this deposit.
3. Make the journal entry to record depletion for the year 20C, when Weaver mined and sold 150,00 tons of ore.
4. Make the journal entry to record depreciation on the building for 20C. Weaver calculates depreciation on the building using the units of production method based on the amount of ore extracted (150,000 tons in 20C).

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Definitions:

Goodwill

The intangible asset that arises as a result of the acquisition of one company by another for a premium value.

Presenter's Block

The phenomenon where an individual finds themselves unable to proceed with a presentation, similar to writer's block.

Descriptive Summary

A detailed overview that conveys the main points, characteristics, or features of a topic or piece of work.

One-Sentence Summary

A concise statement that captures the essence or main point of a larger body of work or argument.