On July 1, 2021, Lambda Company, a calendar year entity purchased the rights to a mine. The total purchased price was P 14,000,000 of which P 2,000,000 was allocable to the land. Estimated reserves were 1,500,000 tons. Lambda expects to extract and sell 25,000 tons per month. The company purchased new equipment on July 1, 2021. The equipment was purchased for P 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 P 500,000. REQUIRED: 1. If sales and production conform to expectations, what is the depletion for 2021? 2. What is the depreciation of the equipment for 2021?

On July 1, 2021, Lambda Company, a calendar year entity purchased the rights to a mine. The total purchased price was P 14,000,000 of which P 2,000,000 was allocable to the land. Estimated reserves were 1,500,000 tons. Lambda expects to extract and sell 25,000 tons per month. The company purchased new equipment on July 1, 2021. The equipment was purchased for P 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 P 500,000. REQUIRED: 1. If sales and production conform to expectations, what is the depletion for 2021? 2. What is the depreciation of the equipment for 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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