Problem 2 A natural resource property was purchased by Clouds Corporation for P5,000,000. The output was estimated to be 1,000,000 tons. Mining equipment was acquired at the cost of P8,000,000. The equipment has a useful life of 10 years but can exhaust the resource in six to eight years. Production is as follows: First year 200,000 tons Second year 250,000 tons Third year None Fourth year 100,000 tons Required: Compute the depletion and depreciation for each of the four years.

Problem 2 A natural resource property was purchased by Clouds Corporation for P5,000,000. The output was estimated to be 1,000,000 tons. Mining equipment was acquired at the cost of P8,000,000. The equipment has a useful life of 10 years but can exhaust the resource in six to eight years. Production is as follows: First year 200,000 tons Second year 250,000 tons Third year None Fourth year 100,000 tons Required: Compute the depletion and depreciation for each of the four years.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 6PA: Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one...

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Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 90,000 tons Year 3: 100,000 tons Year 4: 110,000 tons Year 5: 130,000 tons Calculate the depletion expense for the next five years, and create the journal entry for year one.
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