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Question - Zenith Mining Ltd paid $3 million for a mineral deposit and spent a further $225 000 in developing the property prior to commencing production on 1 July 20X0. It is estimated that the deposit will produce 25 million tonnes of ore and that the land will have an eventual residual value of $25 000. In addition to the development costs, Zenith spent another $500 000 on infrastructure construction at the mine site. Its mining operations during the year ended 30 June 20X1 resulted in:
Tonnes of ore mined 1 000 000
Tonnes of ore sold 900 000
Required - Find the amount to be charged as amortization of pre-production costs for the year?
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