Catherine Company acquired a coal mine at a cost of P25,000,000. Intangible development cost totaled P6,000,000. After extraction has occurred, the entity must restore the property and the estimated fair value of the obligation is P3,000,000. The property can be sold for P8,500,000 after restoration. The entity estimated that 500,000 tons of coal can be extracted. The entity extracted 90,000 tons in the first year. How much is the depletion rate per ton?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Catherine Company acquired a coal mine at a cost of P25,000,000. Intangible development cost totaled P6,000,000. After extraction has occurred, the entity must restore the property and the estimated fair value of the obligation is P3,000,000. The property can be sold for P8,500,000 after restoration. The entity estimated that 500,000 tons of coal can be extracted. The entity extracted 90,000 tons in the first year. How much is the depletion rate per ton?
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