Chapter 3
Long-Term Assets
111
AP-21A (
5
)
Metallic Inc. is an international producer of aluminum through bauxite mining. It recently spent
$5,000,000 cash to purchase a mine with an estimated residual value of zero. The company also
incurred additional expenditures of $700,000 in preparing the mine for the extraction of bauxite.
Metallic Inc. expects to use this mine for eight years with an expected capacity of 200,000 tons of
bauxite over that time.
Required
a) Prepare the journal entry to record the purchase of the bauxite mine.
Date
Account Title and Explanation
Debit
Credit
b) Calculate the unit cost for each ton of bauxite to be extracted.
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c) Metallic Inc. extracted 15,000 tons of bauxite in the first year. Prepare the journal entries to
record the depletion for this year.
Date
Account Title and Explanation
Debit
Credit
