In 2019, Lepanto Mining Company purchased property with natural resources for P28,000,000. The property had a residual value of P5,000,000. However, the entity is required to restore the property to the original condition at a discounted amount of P2,000,000. In 2019, the entity spent P1,000,000 in development cost and constructed a building on the property costing P3,000,000. The entity does not anticipate that the building will have utility after the natural resources are removed.

In 2019, Lepanto Mining Company purchased property with natural resources for P28,000,000. The property had a residual value of P5,000,000. However, the entity is required to restore the property to the original condition at a discounted amount of P2,000,000. In 2019, the entity spent P1,000,000 in development cost and constructed a building on the property costing P3,000,000. The entity does not anticipate that the building will have utility after the natural resources are removed.

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

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Chapter13: Property Transact Ions: Determination Of Gain Or Loss, Basis Considerations, And Nontaxable Exchanges

Section: Chapter Questions

Problem 85P

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Question

11:39
Module1_PPE and ..
Problem 28-13 (AICPA Adapted)
In 2019, Lepanto Mining Company purchased property
with natural resources for P28,000,000. The property had
a residual value of P5,000,000.
However, the entity is required to restore the property
to the original condition at a discounted amount of
P2,000,000.
In 2019, the entity spent P1,000,000 in development cost .
and constructed a building on the property costing
P3,000,000.
The entity does not anticipate that the building will have
utility after the natural resources are removed.
In 2020, an amount of P1,000,000 was spent for additional
development on the mine.
The tonnage mined and estimated remaining tons are:
Tons extracted
Tons remaining
2019
2020
3,000,000
3,500,000
10,000,000
7,000,000
2,500,000
2021
1. What amount should be recognized as depletion for 2020?
a. 6,900,000
b. 9,600,000
c. 8,100,000
d. 8,400,000
2. What amount should be recognized as depletion for 2021?
a. 10,150,000
b. 11,025,000
c. 15,750,000
d.
9,450,000

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