Navajo Mining Company purchased a mine in 2013 for $3 400 000. It was estimated that the mine contained 200 000 tons of ore and that the mine would be worthless after all of the ore was extracted. The company extracted 25 000 tons of ore in 2013 and 30 000 tons of ore in 2014. What is the carrying amount of the mine at the end of 2014?

Question

Quizplus · Accepted Answer

The depletion cost per ton is $3,400,000 / 200,000 tons = $17 per ton. Total depletion for 2013 and 2014 is (25,000 + 30,000) tons * $17 = $935,000. The carrying amount at the end of 2014 is $3,400,000 - $935,000 = $2,465,000.

Navajo Mining Company Purchased a Mine in 2013 for $3