Why is 1,500,000 added to 500,000 in getting the units to be extracted in 2020? As well as 800,000 and 1,700,000 in 2021? The formula for depletion says that the denominator is the number of units estimated to be extracted. How come the estimated tons remaining is added too? Kindly explain please. SOLUTION:Acquisition costAdd: Estimated restoration costs and geological surveysDevelopment cost - 2020P10,000,000500,000800,000P11,300,0001,000,000P10,300,000TotalLess: Residual valueDepletable cost - 2020Depletion in 2020Depletable cost 2020Divide by units estimated to be extracted (500,000+1.5M)Depletion per unitMultiply: Tons extractedDepletion - 2020P10,300,0002,000,0005.15500,000P 2,575,000P10,300,0002,575,000P 7,725,000900,000P 8,625,0002,500,0003.45Total Depletable cost in 2020Less: Accumulated depletionTotalAdd: Development cost - 2021Depletable cost - 2021Divide by: Units estimated to be extractedDepletion per unitMultiply: Tons extracted - 2021Depletion - 2021800,000P 2,760,000 ILLUSTRATION:During 2020, Noble Company purchased property with ore deposit forP10,000,000. The property had a residual value of P1,000,000. However,Noble is legally required to restore the property to its original condition at adiscounted amount of P500,000. In 2020, Noble spent P800,000 indevelopment cost. In 2021, an amount of P900,000 was spent for additionaldevelopment on the mine.The tonnage mined and estimated remaining tons for years 2020 – 2021 areas follows:Estimated Tons Remaining1,500,0001,700,000YearTons Extracted2020500,000800,0002021Required:Compute for the depletion to be recognized for 2020 and 2021?

In order to compute the actual cost of goods produced, the business entity needs to add the expenses…

Why is 1,500,000 added to 500,000 in getting the units to be extracted in 2020? As well as 800,000 and 1,700,000 in 2021? The formula for depletion says that the denominator is the number of units estimated to be extracted. How come the estimated tons remaining is added too? Kindly explain please

Why is 1,500,000 added to 500,000 in getting the units to be extracted in 2020? As well as 800,000 and 1,700,000 in 2021? The formula for depletion says that the denominator is the number of units estimated to be extracted. How come the estimated tons remaining is added too? Kindly explain please

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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