McGuinness Mining Company purchased land containing an estimated 15 million tonnes of ore at a cost of $ 5,400,000. The land without the ore is estimated to be worth $ 600,000. The company expects to operate the mine for 10 years. Buildings costing $ 800,000 are erected on the site and are are depreciated over the life of the mine. Equipment costing $ 1,000,000 is depreciated over the life of the mine.. The buildings and the equipment possess no residual value after the mine is closed. During the first year of operations, the mining company mined and sold 2 million tonnes of ore.
Instructions
a) Calculate the depletion cost per tonne of the mine.
b) Calculate the depletion expense for the first year on the mine.

Question

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The Answer of McGuinness Mining Company purchased land containing an estimated 15 million tonnes of ore at a cost of $ 5,400,000. The land without the ore is estimated to be worth $ 600,000. The company expects to operate the mine for 10 years. Buildings costing $ 800,000 are erected on the site and are are depreciated over the life of the mine. Equipment costing $ 1,000,000 is depreciated over the life of the mine.. The buildings and the equipment possess no residual value after the mine is closed. During the first year of operations, the mining company mined and sold 2 million tonnes of ore.
Instructions
a) Calculate the depletion cost per tonne of the mine.
b) Calculate the depletion expense for the first year on the mine.

McGuinness Mining Company Purchased Land Containing an Estimated 15 Million