On January 1, 2016, Manika Company purchased land with valuable natural ore deposits for P10,000,000. The residual value of the land was P2,000,000. At the time of purchase, a geological survey estimated a recoverable output of 4,000,000 tons. Early in 2016, roads were constructed on the land to aid in the extraction and transportation of the mined ore at a cost of P1,600,000. In 2016, 500,000 tons were mined and sold. A new survey at the end of 2017 estimated 4,200,000 tons of ore available for mining. In 2017, 800,000 tons were mined and sold. (a) What amount should be recognized as depletion for 2016 and 2017?

On January 1, 2016, Manika Company purchased land with valuable natural ore deposits for P10,000,000. The residual value of the land was P2,000,000. At the time of purchase, a geological survey estimated a recoverable output of 4,000,000 tons. Early in 2016, roads were constructed on the land to aid in the extraction and transportation of the mined ore at a cost of P1,600,000. In 2016, 500,000 tons were mined and sold. A new survey at the end of 2017 estimated 4,200,000 tons of ore available for mining. In 2017, 800,000 tons were mined and sold. (a) What amount should be recognized as depletion for 2016 and 2017?

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion

Section: Chapter Questions

Problem 29CE

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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
In January 2015, Fehr Mining Corporation purchased a mineral mine for $6,061,128 with removable ore estimated by geological surveys at 2,598,777 tons. The property has an estimated value of $600,000 after the ore has been extracted. Fehr incurred $1,703,643 of development costs preparing the property for the extraction of ore. During 2015, 340,000 tons were removed and 300,000 tons were sold. What is the total amount of depletion for 2015? (do not round the depletion rate when multiplying it by units removed or sold)
On January 1,2015, CHING Company purchased land with valuable natural ore deposits for $20,000,000. At that time, the estimated recoverable output from the mine is $4,000,000 metric tons of ore after which the land is expected to have residual value of $3,000,000. To facilitate the extraction and transportation of the ore, roads were constructed amounting to $1,500,000. In 2015, 2,000,000 metric tons were mined. At the end of 2016, a new estimate of remaining recoverable ore indicated 2,500,000 metric tons are available. During 2016, 1,500,000 metric tons were mined. How much is the depletion expense for year 2015?
On January 1,2015, GOGO Company purchased land with valuable natural ore deposits for $20,000,000. At that time, the estimated recoverable output from the mine is $4,000,000 metric tons of ore after which the land is expected to have residual value of $3,000,000. To facilitate the extraction and transportation of the ore, roads were constructed amounting to $1,500,000. In 2015, 2,000,000 metric tons were mined. At the end of 2016, a new estimate of remaining recoverable ore indicated 2,500,000 metric tons are available. During 2016, 1,500,000 metric tons were mined. How much is the depletion expense for the year 2016?
On January 2, 2016, Dax Company purchased land for P450,000 from which it is estimated that 400,000 tons of ore could be extracted. It estimates that it will cost P80,000 to restore the land, after which it could be sold for P30,000.During 2016, the company mined 80,000 tons and sold 50,000 tons. During 2017, the company mined 100,000 tons and sold 120,000 tons. At the beginning of 2018 the company spent an additional P100,000, which increased the reserves by 60,000 tons. In 2018, the company mined 140,000 tons and sold 130,000 tons. The company uses a FIFO cost flow assumption. (Round depletion rate to two decimal places)(Note: There are 2 questions in this Problem: Depletion expense for 2017Depletion included in 2018 cost of sales) Depletion for 2017
On July 1, 2017, DOTA Company purchased the rights to a mine. The total purchase price was $7,920,000 of which $240,000 was allocated to land. Estimated reserves were 1,600,000 tons. Jungkook expects to extract and sell 25,000 tons per month. Jungkook purchased new equipment on July 1, 2017. The equipment cost $3,960,000 and have a useful life of 8 years. However, after all the resources are removed, the equipment will be of no use and will be sold for $120,000. If sales and production conformed to expectations, what amount of depletion should the company recognize in 2017?
On July 1, 2017, Lethargic Company, a calendar year entity, purchased the rights to a mine. The total purchase price was 14,000,000 of which 2,000,000 was allocable to the land. Estimated reserves were 1,500,000 tons. The entity expects to extract and sell 25,000 tons per month. The entity purchased new equipment on July 1, 2017. The equipment was purchased for 8,000,000 and had a useful life of 8 years. However, after all the resource is removed, the equipment will be of no use and will be sold for 500,000. What is the depletion for 2017?
During 2014, Bolton Corporation acquired a mineral mine for P1,500,000 of which P200,000 wasascribed to land value after the mineral has been removed. Geological surveys have indicated that10 million units of the mineral could be extracted. During 2014, 2,000,000 units were extracted and1,600,000 units were sold. What is the amount of depletion expensed for 2014? a. P300,000 b. P208,000 c. P240,000 d. P260,000
On April 17, 2016, the Loadstone Mining Company purchased the rights to a coal mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the coal totaled $4,500,000. The company expects to extract 900,000 tons of coal during a four-year period. During 2016, 240,000 tons were extracted and sold immediately. Required: 1. Calculate depletion for 2016. 2. Discuss the accounting treatment of the depletion calculated in requirement 1.
On July 1, 2015, Lam Company, a calendar year corporation, purchased the rights to mine. The total purchase price was P16,400,000, of which P2,000,000 was allocated to the land. Estimated reserves were 1,800,000 tons. The entity expects to extract and sell 25,000 tons per month. The entity purchased new equipment on July 1, 2015 for P7,500,000. The equipment had a useful life of 8 years. However, after all the resources is removed, the equipment would be of no use and could be sold for P300,000.What amount should be recorded as depreciation of the mining equipment for 2015?
In March, 2017, Mallory Mines Co. purchased a coal mine for $8,000,000. Removable coal is estimated at 1,500,000 tons. Mallory is required to restore the land at an estimated cost of $960,000. The company incurred $200,000 of development costs preparing the mine for production. During 2017, 360,000 tons were removed and sold. The total amount of depletion that Mallory should record for 2017 is Select one: a. $2,428,800. b. $2,198,400. • c. $1,619,200. d. $1,465,600.
Raya's Mining Co purchased a mine for $8 million on July 1, 2014. The mine will generate an estimated 30 million tonnes of nickel. The mine has a residual value of $500 000, and the restoration cost at the end of the mine's useful life is estimated at $600 000. In the first year, 5 million tonnes of nickel were extracted. Prepare the journal entry to record the depletion expense for the first year, ended June 30, 2015.