Reference no: EM132576372

Question 1 - Lee Company purchased a truck on January 1, 2001 for $60,000. It is estimated that the equipment will have a $5,000 residual value at the end of its five-year useful life. It is also estimated that the equipment will travel 100,000 Kms over its five-year life.

a) Calculate the amount of amortization expense for the year ended December 31, 2001, using the double declining balance method of amortization.

b) If 16,000 Kms are traveled in 2001 and 24,000 Kms are traveled in 2002, what is the book value of the truck at December 31, 2002? The company uses the units-of-activity amortization method.

c) Calculate the amount of amortization expense for the year ended December 31, 2002, using the straight-line method of amortization.

Question 2 - On Feb. 1, 2002, Miyasawa Mining Company purchased for $80 million a mine which is estimated to have 250,000 tonnes of ore and a residual value of $3 million. The cost of restoration at the end of the useful life is estimated at $8 million. During the first year, 50,000 tonnes was mined.

a) Calculate the amount of amortization that should be recorded on December 31, 2002.

b) Calculate the amount of the restoration liability.

c) Show the journal entry for December 31, 2002.