Question

Please include the formula used to solve.

1)Navajo Mining Company purchased a mine in 2013 for​ $3,400,000. It was estimated that the mine contained​ 200,000 tons of ore and that the mine would be worthless after all of the ore was extracted. The company extracted​ 25,000 tons of are in 2013 and​ 30,000 tons of ore in 2014. What is the book value of the mine at the end of​ 2014? A. ​$2,975,000 B. ​$2,465,000 C. ​$2,720,000 D. ​$3,060,000

2)

On January​ 1, 2012, Portwell Company purchased a patent for​ $200,000. They estimate a useful life of 4 years. What entry is needed at the end of the first​ year?

A.

Loss on patents	​50,000
Patents		​50,000

B.

Amortization expense

minus

patents	​50,000
Patents		​50,000

C.

Patents	​50,000
Amortization expense minus

patents

​50,000

D.

Amortization expense

minus

patents	​50,000
Accumulated amortization		​50,000

Answer 1

1. Depletion expense per ton = (Cost - Salvage value)/Total tons expected to be extracted = (3,400,000-0)/200,000 = 17 per ton Depletion expense for 2013 = 25,000*17 = 425,000 2014 = 30,000*17 = 510,000 Book value at the end of 2014 = Cost - Accumulated depletion till 2014 = 3,400,000 - (425,000+510,000) = 2,465,000 Option B

2. The entry would be Debit - Amortization expense - Patents 50,000 Credit - Patents 50,000 (200,000/4) Option B (some companies decrease the intangible asset value directly. Some companies create contra assets instead. If option B is shown as incorrect, select option D)