In 2017, Sunflower Company acquired a silver mind in Eastern Mindanao. Because the mine is located deep in the Mindanao frontier, sunflower was able to acquire the mine for the low price of P50,000. In 2018, developmental cost P750, 000. Because of the improvements o the mind and to the surrounding land, it is estimated that the mine can be sold for P600, 000 when mining activities are complete. During 2019, the buildings were constructed near the mine site to house the mine workers and their families. The total cost of the five buildings was P2,000,000. Estimated residual value is P200,000. In 2018, geologists estimated that 4 million tons of silver ore be removed from the mine for refining. During 2020, the first year of operations, only 500,000 tons of silver ore were removed from the mine. However, in 2021, workers mined 1 million tons of silver. During the same year, geologists discovered that the mine contained 3 million tons of silver ore in addition to the original 4 million tons. Development costs of P1,300,000 were made to the mine early in 2021 to facilitate the remov of the additional silver. Early in 2021, an additional building was constructed at a cost P375,000 to house the additional workers needed to excavate the added silver. This building not expected to have any residual value. REQUIRED: 1. Complete t depletion for 2020 and 2021. 2. Compute the depreciation of the buildings for 2020 and 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In 2017, Sunflower Company acquired a silver mind in Eastern Mindanao. Because the mine is located deep in the Mindanao frontier, sunflower was able to acquire the mine for the low price of P50,000. In 2018, developmental cost P750, 000. Because of the improvements o the mind and to the surrounding land, it is estimated that the mine can be sold for P600, 000 when mining activities are complete. During 2019, the buildings were constructed near the mine site to house the mine workers and their families. The total cost of the five buildings was P2,000,000. Estimated residual value is P200,000. In 2018, geologists estimated that 4 million tons of silver ore be removed from the mine for refining. During 2020, the first year of operations, only 500,000 tons of silver ore were removed from the mine. However, in 2021, workers mined 1 million tons of silver. During the same year, geologists discovered that the mine contained 3 million tons of silver ore in addition to the original 4 million tons. Development costs of P1,300,000 were made to the mine early in 2021 to facilitate the remov of the additional silver. Early in 2021, an additional building was constructed at a cost P375,000 to house the additional workers needed to excavate the added silver. This building not expected to have any residual value. REQUIRED: 1. Complete t depletion for 2020 and 2021. 2. Compute the depreciation of the buildings for 2020 and 2021.

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