In: Accounting
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.
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) |