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

Answer:

$5,320,000

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