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taurus [48]
2 years ago
11

. In January, Vorst Co. purchased a mineral mine for $2,640,000 with an estimated 1,200,000 of removable ore. After it has extra

cted all the ore, Vorst will be required by law to restore the land to its original condition at an estimated cost of $180,000. Vorst believes that it would be able to sell the property afterwards for $300,000. During the year, Vorst incurred $360,000 of development costs preparing the mine for production and it removed and sold 60,000 tons of ore. In its year-end income statement, what amount should Vorst report as depletion
Business
1 answer:
V125BC [204]2 years ago
7 0

Answer:

$144,000

Explanation:

Calculation to determine what amount should Vorst report as depletion

First step is to calculate the Depletion base using this formula

Depletion base= Purchase price +Development costs+Estimated restoration costs-Expected salvage value

Let plug in the formula

Depletion base=$2,640,000+ $360,000+$180,000-$300,000

Depletion base=$2,880,000

Second step is to calculate the depletion

Depletion= ($2,880,000 / 1,200,000 tons).

Depletion=$2.40 per ton

Now let calculate the Depletion expense

Depletion expense =$2.40 per ton ×60,000 tons sold

Depletion expense=$144,000

Therefore the amount that Vorst should report as depletion is $144,000

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Magic Realm, Inc., has developed a new fantasy board game. The company sold 15,000 games last year at a selling price of $20 per
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Explanation:

1. a. Contribution format income statement for the game last year and compute the degree of operating leverage

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Contribution Income Statement

Total Per Unit

Sales                                $300,000            $20

Variable                            90,000                6

Contribution margin        210,000            $14

Fixed expense                 182,000

Net operating income      $28,000

1.b. Compute the degree of operating leverage

The degree of operating leverage is:

Degree of operating leverage = Contribution margin/Net operating income

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                                                   = 7.5

2. a. Sales of 18,000 games represent a 20% increase over last year's sales. Because the degree of operating leverage is 7.5, net operating income should increase by 7.5 times as much, or by 150% (7.5 × 20%).

                                                   = 150%

2.b. The expected total dollar amount of net operating income for next year would be:

Last year's net operating income         $28,000

Expected increase in net operating income

next year                                  (150% × $28,000) 42,000

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arsen [322]

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