Question

1.Early in the current year, Tokay Co. purchased the Silverton Mine at a cost of $36,980,000. The mine was estimated to contain 330,000 tons of ore and to have a residual value of $2,000,000 after mining operations are completed. During the year, 315,000 tons of ore were removed from the mine. At year-end, the book value of the mine (cost minus accumulated depletion) is:

$3,590,000.

$32,980,000.

$33,390,000.

$34,980,000.

2. Intangible assets are assets used in business operations but which:

Cannot be sold.

Have been depreciated below their estimated salvage values.

Lack physical substance.

Cannot be specifically identified.

Answer 1

Solution:

1).  Book value is = $3,905,000.

Details	Amount($)
Cost	$36,980,000
Less: Residual value	$2,000,000
Depreciable value	$34,980,000
Estimated quantity	330,000
Cost of depreciation ($34,980,000/330,000)	$105 per ton
Tons of ore removed	315,000
Current year Depreciation 315,000*105	$33,075,000
Book value = $36,980,000 - $33,075,000	$3,905,000

2).

Intangibles can be sold, can be specifically identified and are long lived, but have no physical substance.

Example: Goodwill ,patents, copy rights etc.

So, correct answer is Option (C). Lack physical substance.