Question

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.

Answer 1

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)