Question
In: Accounting
On May 1, 2021, Hecala Mining entered into an agreement with the state of New Mexico...
On May 1, 2021, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $9.4 million. Additional costs and purchases included the following (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):
| Development costs in preparing the mine | $ | 2,600,000 | |
| Mining equipment | 136,800 | ||
| Construction of various structures on site | 40,700 | ||
After the minerals are removed from the mine, the equipment will be
sold for an estimated residual value of $11,000. The structures
will be torn down.
Geologists estimate that 740,000 tons of ore can be extracted from
the mine. After the ore is removed the land will revert back to the
state of New Mexico.
The contract with the state requires Hecala to restore the land to
its original condition after mining operations are completed in
approximately four years. Management has provided the following
possible outflows for the restoration costs:
| Cash Outflow | Probability | |||
| $ | 540,000 | 30% | ||
| 640,000 | 40% | |||
| 740,000 | 30% | |||
Hecala’s credit-adjusted risk-free interest rate is 9%. During
2021, Hecala extracted 114,000 tons of ore from the mine. The
company’s fiscal year ends on December 31.
Required:
1. Determine the amount at which Hecala will
record the mine.
2. Calculate the depletion of the mine and the
depreciation of the mining facilities and equipment for 2021,
assuming that Hecala uses the units-of-production method for both
depreciation and depletion.
3. How much accretion expense will the company
record in its income statement for the 2021 fiscal year?
4. Are depletion of the mine and depreciation of
the mining facilities and equipment reported as separate expenses
in the income statement?
5. During 2022, Hecala changed its estimate of the
total amount of ore originally in the mine from 740,000 to 940,000
tons. Calculate the depletion of the mine and depreciation of the
mining facilities and equipment for 2022 assuming Hecala extracted
144,000 tons of ore in 2022.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
On May 1, 2021, Hecala Mining entered into an agreement with the state of New Mexico...
On May 1, 2018, Hecala Mining entered into an agreement with the state of New Mexico...
On May 1, 2018, Hecala Mining entered into an agreement with the state of New Mexico...
On May 1, 2018, Hecala Mining entered into an agreement with the state of New Mexico...
On May 1, 2018, Hecala Mining entered into an agreement with the state of New Mexico...
On May 1, 2021, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $10 million.
1. On September 17, 2021, Ziltech, Inc., entered into an agreement to sell one of its...
Is the new trade agreement negotiated by President Trump with Mexico and Canada to replace NAFTA...
On January 1, MU separately entered into a non-exclusive licensing agreement with KH. The licensing agreement...
On 1 January 2015, Finley entered into an agreement to lease a boat. The term of...
- Consider a gaseous feed, CA0=100, CB0=200, enters a flow reactor at T0=1000 K and ?0= 5...
- Can you find examples of biotech/pharmaceutical companies that fall into these categories: Financial Responsibility (Finan. Needs)...
- Smoky Mountain Corporation makes two types of hiking boots—the Xtreme and the Pathfinder. Data concerning these...
- IN JAVA: Write a simple program that takes 5 inputs from the user and save them...
- Conduct research to find other examples where the exclusion of a species led to dramatic changes...
- Advertising & the First Amendment The question is often asked: Does the First Amendment protect advertisements?...
- public class ProductThread { static class ProductThreads extends Thread{ private int begin, end; int[] v1, v2;...