Use the Following Information for Questions

question 41

Multiple Choice

Use the following information for questions.
On January 1, 2011, Edmondton Inc.purchased equipment with a cost of €4,500,000, a useful life of 12 years and no salvage value.The Company uses straight-line depreciation.At December 31, 2011, the company determines that impairment indicators are present.The fair value less cost to sell the asset is estimated to be €3,850,000.The asset's value-in-use is estimated to be €3,500,000.There is no change in the asset's useful life or salvage value.
-Percy Resources Company acquired a tract of land containing an extractable mineral resource.Percy is required by its purchase contract to restore the land to a condition suitable for recreational use after it has extracted the mineral resource.Geological surveys estimate that the recoverable reserves will be 2,000,000 tons, and that the land will have a value of $1,200,000 after restoration.Relevant cost information follows: If Percy maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?

• A)$3.90
• B)$4.50
• C)$4.80
• D)$5.40

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Definitions:

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