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The accounting staff at Golden Mining Company will soon prepare year-end entries

The accounting staff at Golden Mining Company will soon prepare year-end entries to the accounting system to record the partial consumption of certainlong-term assets. Your advice is sought regarding each of the following situations.

1. A mining site was acquired 10 years ago at a cost of $4,900,000. This included $700,000 to prepare an environmental impact statement, conduct a required survey, and build road access. The mine was expected to produce approximately 20 million tons of highgrade ore, after which the site could be sold for $500,000. This past year, 3.0 million tons were produced, processed, and sold.

2. Trucks and machinery having an estimated useful life of five years are being depreciated by the double-declining-balance method. These assets were purchased for $152,000 and have an estimated residual value of $22,000. This is the end of their third year in use.

3. A patent relating to the ore-refining process was purchased three years ago at a cost of $57,000. At the time of purchase, the patent had a remaining legal life of eight years. Management wants the required write-off of the patent’s cost to have the minimum effect on net income that is allowed under the circumstances.

Required

A. Assist the accounting staff by suggesting the year-endentries that should be made to the accounting system for each of the situations above.

B. Assume the trucks and machinery have always been depreciated using the straight-line method. Assume further that it was determined during the current year that the estimated useful life would actually be a total of 10 years with are sidual value of $2,000. What amount of depreciation expense would have been reported during each of the first two years under the straight-line method? What amount of depreciation expense will be reported for the current year and the years that follow underthe straight-line method?

May 04 2018 View more View Less

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