On January 1, 2015, Lord Company purchased land with valuable natural ore deposits for P5,000,000. The residual value of the land was P1,000,000. At the time of purchase, a geological survey estimated a recoverable output of 2,000,000 tons. Early in 2015, roads were constructed on the land to aid in the extraction and transportation of the minded ore at a cost of P800,000. In 2015, 250,000 tons were minded and tons of ore available for mining. In 2016, 400,000 were mined and sold. What amount should be recognized as depletion expense for 2016? Choices: a. 600,000 b. 960,000 c. 672,000 d. 800,000
On January 1, 2015, Lord Company purchased land with valuable natural ore deposits for P5,000,000. The residual value of the land was P1,000,000. At the time of purchase, a geological survey estimated a recoverable output of 2,000,000 tons. Early in 2015, roads were constructed on the land to aid in the extraction and transportation of the minded ore at a cost of P800,000. In 2015, 250,000 tons were minded and tons of ore available for mining. In 2016, 400,000 were mined and sold. What amount should be recognized as depletion expense for 2016? Choices: a. 600,000 b. 960,000 c. 672,000 d. 800,000
Chapter1: Financial Statements And Business Decisions
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Depreciation Methods
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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.
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On January 1, 2015, Lord Company purchased land with valuable natural ore deposits for P5,000,000. The residual value of the land was P1,000,000. At the time of purchase, a geological survey estimated a recoverable output of 2,000,000 tons. Early in 2015, roads were constructed on the land to aid in the extraction and transportation of the minded ore at a cost of P800,000. In 2015, 250,000 tons were minded and tons of ore available for mining. In 2016, 400,000 were mined and sold. What amount should be recognized as depletion expense for 2016?
Choices:
a. 600,000
b. 960,000
c. 672,000
d. 800,000
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