A coal mine was purchased for $400 000. Estimated production is 20 000 000 tons of coal after which the mine will be sold for $40 000. During a recent year 6 500 000 tons of coal were produced and sold. Amortisation for the year would be:

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The amortisation for the year is calculated by subtracting the residual value from the purchase price, then dividing by the total estimated production to find the amortisation per ton, and finally multiplying by the actual production for the year. Calculation: ($400,000 - $40,000) / 20,000,000 tons = $0.018 per ton. For 6,500,000 tons: $0.018 * 6,500,000 = $117,000.

A Coal Mine Was Purchased for $400 000