Question

Early in the current year, Tokay Co. purchased the Silverton Mine at a cost of $21,220,000. The mine was estimated to contain 210,000 tons of ore and to have a residual value of $4,000,000 after mining operations are completed. During the year, 195,000 tons of ore were removed from the mine. At year-end, the book value of the mine (cost minus accumulated depletion) is:

Answer 1

=$5,230,000

Step-by-step explanation:

Annual Depreciation=Depreciable Value×Units produced during the year estimated total production

The units of the depreciation method start by calculating the depreciable amount.

Depreciable amount = Assets cost - salvage value

=$21,220,000.-$4,000,000

=$17,220,000

depreciation expense per unit= depreciable amount/production capacity

=$17,220,000/210,000 per tone

=$82 per tone

During the year, 195,000 were extracted.

The depreciation value for the year will be

= 82 x 195,000

=$15,990,000

book value will be asset cost minus depreciation expense

=$21,220,000 -$15,990,000

=$5,230,000

.