McGuinness Mining Company Purchased Land Containing an Estimated 15 Million

Essay

McGuinness Mining Company purchased land containing an estimated 15 million tonnes of ore at a cost of $5,400,000. The land without the ore is estimated to be worth $600,000. The company expects to operate the mine for 10 years. Buildings costing $800,000 are erected on the site and are expected to last for 25 years. Equipment costing $1,000,000 with an estimated life of 12 years is installed. The buildings and the equipment possess no residual value after the mine is closed. During the first year of operations, the mining company mined and sold 2 million tonnes of ore.
Instructions
a. Calculate the depreciation cost per tonne of the mine.
b. Calculate the depreciation expense for the first year on the mine.
c. Calculate the appropriate first year's depreciation expense for the buildings.
d. Calculate the appropriate first year's depreciation expense for the equipment.