Question

Early in the current year, Tokay Co. purchased the Silverton Mine at a cost of $25,120,000. The mine was estimated to contain 240,000 tons of ore and to have a residual value of $4,000,000 after mining operations are completed. During the year, 225,000 tons of ore were removed from the mine. At year-end, the book value of the mine (cost minus accumulated depletion) is:

$21,120,000.

$5,320,000.

$19,800,000.

$17,120,000.

Answer 1

$5,320,000

Step-by-step explanation:

the cost per ton = Cost - salvage value/ estimated tons.

= 25,120,000 - 4,000,000 /240,000

= $88 per ton

Tons remaning = 240,000 - 225000

= 15,000 ton

book value of the mine at year-end = (15000 ton x $88) + 4,000,000

= 132000 + 4,000,000

= $5,320,000

Therefore, At year-end, the book value of the mine (cost minus accumulated depletion) is $5,320,000