Question

On January 1, 2015, Major Company purchased a uranium mine for $800,000. On that date, Major estimated that the mine contained 1,000 tons of ore. At the end of the productive years of the mine, Major Company will be required to spend $4,200,000 to clean up the mine site. The appropriate discount rate is 8%, and it is estimated that it will take approximately 14 years to mine all of the ore. Major uses the productive-output method of depreciation. During 2015, Major extracted 100 tons of ore from the mine.

• 1. Compute the amount of depreciation (or depletion) expense for 2015.
• 2. Compute the amount of accretion expense for 2015.

Answer 1