Mighty Mining Company acquired property for $16,800,000 containing platinum ore mine on January 1, 2016. Mighty Mining estimated that the mine would produce 500,000 tons of ore and once mining is completed, the property could be sold for $300,000. During 2016, 2017, and 2018, Mighty Mining recovered 40,000, 60,000, and 150,000 tons of ore, respectively.
As a result, the mine should appear on Mighty Mining's balance sheet at what amount (net of depletion)?
A) $ 8,550,000
B) $ 4,275,000
C) $ 8,200,000
D) $16,250,000

Question

Quizplus · Accepted Answer

(40,000 + 60,000 + 150,000) / 500,000 = 50% depleted
$16,800,000 - [(50% x ($16,800,000 - $300,000)] = $8,550,000

Mighty Mining Company Acquired Property for $16,800,000 Containing Platinum Ore