Question

In: Accounting

Copper Explorations recently acquired the rights to mine a new site. Equipment and a truck were...

Copper Explorations recently acquired the rights to mine a new site. Equipment and a truck were purchased to begin mining operations at the site. Details of the mining assets follow:

Asset Date of Purchase Cost Est.
Residual
Est. Life
Mineral rights Mar. 1/20 $ 96,000 $ 0 4 yrs
Equipment Mar. 1/20 283,800 0 4 yrs
Truck Mar. 1/20 134,400 0 4 yrs


Copper's year-end is December 31 and it uses the straight-line method for all mining assets including intangibles.

Required:
1.
Record amortization and depreciation at December 31, 2020, on the mining assets, including the mineral rights.

2. Assume the mine was closed on October 31, 2023, and the assets were scrapped. Record the disposal of the assets.

Solutions

Expert Solution

The journal entries are as follows:-

S.No. Date Particulars Amount $

Amount $

1. Dec,31,2020 Amortization expense- Mineral rights(96000*10/48 months) 20,000
Depriciation expense- Equipment(283800*10/48) 59125
Depriciation expense- truck(134400*10/48) 28000
Accumulated amortization- mineral rights 20,000
Accumulated depriciation- equipment 59125
Accumulated deprication - truck 28000
(To record amortization and depriciation)

2. If mine was closed on October 31, 2023, and the assets were scrapped, then accumulated depriciation of 44 months is to be taken.

S.No. Date Particulars Amount $

Amount $

2. Dec,31,2020 Accumulated Amortization - Mineral rights(96000*44/48 months) 88000
Accumulated Depriciation Equipment(283800*44/48) 260150
Accumulated Depriciation truck(134400*44/48) 123200
Loss on disposal of assets (Balancing figure) 42850
Mineral rights 96000
Equipment 283800
Truck 134400
(To record disposal of assets)

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