On July 1, 2017, Jungkook Mining Company purchased the rights to a mine. The total purchase price was P7,920,000 of which P240,000 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 P3,960,000 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 P120,000. If sales and production conformed to expectations, what amount of depletion should the company recognize in 2017?
On July 1, 2017, Jungkook Mining Company purchased the rights to a mine. The total purchase price was P7,920,000 of which P240,000 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 P3,960,000 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 P120,000. If sales and production conformed to expectations, what amount of depletion should the company recognize in 2017?
Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion
Section: Chapter Questions
Problem 29CE
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On July 1, 2017, Jungkook Mining Company purchased the rights to a mine. The total purchase price was P7,920,000 of which P240,000 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 P3,960,000 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 P120,000. If sales and production conformed to expectations, what amount of depletion should the company recognize in 2017?
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