Question Details

In calculating resource amortization, residual value  is 



1.	In calculating resource amortization, residual value  is 
		a.	always immaterial.
		b.	ignored.
		c.	impossible to estimate.
		d.	included in the calculation.

	
2.	If a mining company extracts 1,500,000 tonnes in a period but only sells 1,200,000 tonnes,
		a.	total amortization on the mine is based on the 1,200,000 tonnes.
		b.	amortization expense is recognized on the 1,500,000 tonnes extracted.
		c.	amortization expense is recognized on the 1,200,000 tonnes extracted and sold.
		d.	a separate accumulated amortization account is set up to record amortization on the 300,000 tonnes extracted but not sold.

	3.	A coal company invests $12 million in a mine estimated to have 20 million tonnes of coal and no residual value. It is expected that the mine will be in operation for 5 years. In the first year, 1,000,000 tonnes of coal are extracted and sold. What is the amortization expense for the first year?
		a.	$600,000.
		b.	$240,000.
		c.	$60,000.
		d.	Cannot be determined from the information provided.

	4.	Accumulated Amortization for natural resources
		a.	is reported on the income statement as a cost of producing the product.
		b.	has a normal debit balance.
		c.	is reported in the current asset section of the balance sheet.
		d.	can be credited directly to the natural resource account.

	5.	On July 1, 2001, Manitoba Mining Company purchased the mineral rights to a granite deposit for $700,000. It is estimated that the recoverable granite will be 400,000 tonnes. During 2001, 100,000 tonnes of granite was extracted and 60,000 tonnes were sold.  The amount of the Amortization Expense recognized for 2001 would be
		a.	$87,500.
		b.	$52,500.
		c.	$105,000.
		d.	$175,000.




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