Answer:
Marion Company
a1) Depletion of the Mine for two years:
2018: 41,000/310,000 * $1,488,000 = $196,800
2019: 51,000/397,500 * $1,488,000 = $190,913
a2) Depreciation of Mining Facilities:
2018: 41,000/310,000 *$102,300 = $13,530
2019: 51,000/397,500 * $102,300 = $13,125
a3) Depreciation of Mining Equipment
2018: 41,000/310,000 *$46,500 = $6,150
2018: 51,000/397,500 * $46,500 = $5,966
b) Book Values December 31, 2019:
1) Mineral Mine:
Cost = $1,598,000
Accumulated Depletion $387,713 (2018 & 2019)
Book Value = $1,210,287
b2) Structures:
Cost = $102,300
Accumulated Depreciation $26,655 (2018 & 2019)
Book Value = $75,645
b3) Equipment:
Cost = $51,500
Accumulated Depreciation $12,116
Book Value = $39,384
Explanation:
a) Cost of Mine:
Land $1,150,000
Development $448,000
Less Resale ($110,000)
Total cost = $1,488,000
b) Cost of Facilities or Structure:
Building cost = $102,300
c) Cost of Equipment = $51,500 - $5,000 = $46,500
d) Depletion is an accrual accounting technique used to allocate the cost of extracting natural resources. It is like depreciation and amortization, which lower the cost value of an asset incrementally through periodic charges to income.
e) Depreciation is an accounting method for allocating the cost (the value used up) of a tangible or physical asset over its useful life.
