Question;E11-10 PG 599;The Thompson Corporation, a manufacturer of steel;products, began operations on October 1, 2009. The accounting department of;Thompson has started the fixed-asset and depreciation schedule presented below.;You have been asked to assist in completing this schedule. In addition to;ascertaining that the data already on the schedule are correct, you have;obtained the following information from the company?s records and personnel;a. Depreciation;is computed from the from the first of the month of acquisition to the first of;the month of disposition;b. Land;A and Building A were acquired from a predecessor corporation. Thompson paid;$812,500 for the land and building together. At the time of acquisition, the;land had a fair value of $72,000 and the building had a fair value of $828,000.;c. Land;B was acquired on October 2, 2009, in exchange for 3,000 newly issued shares of;Thompson?s common stock. At the date of acquisition, the stock had a par value;of $5 per share and a fair value of $25 per share. During October 2009;Thompson paid $10,400 to demolish an existing building on this land so it could;construct a new building.;d. Construction;of Building B on the newly acquired land began on October 1, 2010. By September;30, 2011, Thompson had paid $210,000 of the estimated total construction costs;of $300,000. Estimated completion and occupancy are July 2012.;e. Certain;equipment was donated to the corporation by the city. An independent appraisal;of the equipment when donated placed the fair value at $16,000 and the residual;value at $2,000.;f. Machine;A?s total cost $110,000 includes installation changes of 4550 and normal;repairs and maintenance of $11,000. Residual value is estimated at $5,500.;Machine A was sold on February 1, 2011.;g. On;October 1, 2010. Machine B was acquired with a down payment of $4,000 and the;remaining payment to be made in 10 annual installment of $4,000 each beginning;October 1, 2011. The prevailing interest rate was 8%.;THOMAS;CORPORATION;Fixed;Asset and Depreciation Schedule;For;Fiscal Year Ended September 30, 2010, and September 30, 2011;Depreciation for Year;Ended 9/30;Asset;Acquisition cost;Cost;Residual;Depreciation method;Estimated life in Years;2010;2011;Land A;10/1/09;$(1);N/A;N/A;N/A;N/A;N/A;Building A;10/1/09;(2);$47,500;SL;(3);$14,000;$(4);Land B;10/2/09;(5);N/A;N/A;N/A;N/A;N/A;Building B;Under;210,000;SL;30;(6);Donated Equipment;10/2/09;(7);2,000;150% Declining balance;10;(8);(9);Machine A;10/2/09;(10);5,500;Sum-of-the-year?s-digits;10;(11);(12);Machine B;10/1/10;(13);SL;15;(14);Required;Supply the;correct amount of each numbered item on the schedule. Round each answer to the;nearest dollar. (AICPA adapted);P11-7 PG 610;In 2011, the Marion Company purchased land;containing a mineral mine for $1,600,000. Additional costs of $600,000 were;incurred to develop the mine. Geologists estimated that 400,000 tons of ore;would be extracted. After the ore is removed, the land will have a resale value;of $100,000.;To aid in;the extraction, Marion build various structures and small storage building on;the site at a cost of $150,000. These structures have a useful life of 10;years. The structure cannot be moved after the ore has been removed and will be;left at the site. In addition, new equipment costing $80,000 was purchased and;installed at the site. Marion does not plan to move the equipment to another;site, but estimates that it can be sold at auction for $4,000 after the mining;project is completed.;In 2011;50,000 tons of ore were extracted and sold. In 2012, the estimate of total tons;of ore in the mine was revised from 400,000 to 487,500. During 2012, 80,000;tons were extracted, of which 60,000 tons were sold.;Required;1. Compute;depletion and depreciation of the mine and the mining facilities and equipment;for 2011 and 2012. Marion uses the units-of-production method to determine;depreciation on mining facilities and equipment.;2. Compute;the book value of the mineral mine, structure, and equipment as of December 31;2012.;3. Discuss;the accounting treatment of the depletion and depreciation on the mine and;mining facilities and equipment.
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