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Depletion 2

1. The amount recorded as depletion for 2019 should be 650,000 tons, calculated by taking the 500,000 tons mined and multiplying it by the depletion rate of 1.3. 2. The amount recorded as depletion for 2020 should be 900,000, calculated by taking the 1,000,000 tons mined and multiplying it by the depletion rate of 0.9. 3. The amount recorded as depreciation for the building in 2019 should be 225,000, calculated by taking the depreciable amount of 1,800,000 and multiplying it by the rate of 0.45. 4. The

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Paula Mae Dacanay
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7K views2 pages

Depletion 2

1. The amount recorded as depletion for 2019 should be 650,000 tons, calculated by taking the 500,000 tons mined and multiplying it by the depletion rate of 1.3. 2. The amount recorded as depletion for 2020 should be 900,000, calculated by taking the 1,000,000 tons mined and multiplying it by the depletion rate of 0.9. 3. The amount recorded as depreciation for the building in 2019 should be 225,000, calculated by taking the depreciable amount of 1,800,000 and multiplying it by the rate of 0.45. 4. The

Uploaded by

Paula Mae Dacanay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

In 2016, Sunflower Company acquired a silver mine in Eastern Mindanao.

Because the mine is located


deep in the Mindanao frontier, the entity was able to acquire the mine for the low price of P50, 000.

In 2017, the entity constructed a road to the silver mine costing P5, 000,000. Improvements and other
development costs made in 2017 cost P750, 000.

Because of the improvements to the mine and to the surrounding land, it is estimated that the mine can
be sold for P600, 000 when mining activities are complete.

During 2018, a building was constructed near the mine site to house the mine workers and their
families.

The total cost of the building was P2, 000,000. Estimated residual value is P200, 000.

Geologist estimated that 4,000,000 tons of silver ore could be removed from the mine for refining.

During 2019, the first year of operations, only 500,000 tons of silver ore were removed from the mine.

However, in 2020, workers mined 1,000,000 tons of silver.

During the same year, geologists discovered that the mine contained 3,000,000 tons of silver ore in
addition to the original 4,000,000 tons.

Development costs of P1, 300,000 were made to the mine early in 2020 to facilitate to removal of the
additional silver.

Early in 2020, an additional building was constructed at a cost of P375, 000 to house the additional
workers needed to excavate the added silver. This building is not expected to have any residual value.

1. What amount should be recorded as depletion for 2019?


2. What amount should be recorded as depletion for 2020?
3. What amount should be recorded as depreciation of building for 2019?
4. What amount should be recorded as depreciation of building for 2020?

Resources Property 2.2 Depletable amount


50,000.00 5,200,000.00

5,000,000.0
Road Construction 0 Development Costr 1,300,000.00
Less: depletion fr
Improvements and devep. 750,000.00 2019 650,000.00

Less: Residual Value (600,000.00) Depletable amount 5,850,000.00

5,200,000.0
Depletable amount 0 Divided by:

4,000,000.0
divided by : est. extraction 0 (3M+4M-500K) 6,500,000.00

Rate 1.30 Rate 0.90


Multiply by: Mined in
Mined 2019 500,000 2020 1,000,000.00

Depletion for 2019 650,000.00 Depletion for 2020 900,000.00

2,000,000.0
Building 0 Depreciable amount 1,800,000.00

Less: Residual Value 200,000.00 Additional Building 375,000.00

1,800,000.0
totsl 0 Total 2,175,000.00

4,000,000.0 Less: depreciation for


divided by : est. extraction 0 2019 225,000.00

Rate 0.45 Total 1,950,000.00

Mined 2019 500,000 Divided by:

Depreciation for 2019 225,000.00 (3M+4M-500K) 6,500,000.00

Rate 0.30
Multiply by: Mined in
2020 1,000,000.00

Depletion for 2020 300,000.00

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