Scribd
Upload
3K views2 pages

Problems

Garlian Mining Company purchased a property for $28 million in 2014 that had mining resources and a residual value of $5 million. They spent $1 million each in 2014 and 2015 on development costs. Depletion amounts are calculated based on tons extracted each year relative to total estimated tons. For 2016, 3.5 million tons were extracted, with 2.5 million tons remaining. The depletion amount for 2016 is $11,025,000.

Uploaded by

Lian Garl
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
3K views2 pages

Problems

Garlian Mining Company purchased a property for $28 million in 2014 that had mining resources and a residual value of $5 million. They spent $1 million each in 2014 and 2015 on development costs. Depletion amounts are calculated based on tons extracted each year relative to total estimated tons. For 2016, 3.5 million tons were extracted, with 2.5 million tons remaining. The depletion amount for 2016 is $11,025,000.

Uploaded by

Lian Garl
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

In 2014, Garlian Mining Company purchased property with natural resources for P28,000,000.

The
property had a residual value of P5,000,000.

However, the entity is required to restore the property to the original condition at a discounted amount
of P2,000,000.

In 2014, the entity spent P1,000,000 in development cost.

In 2015, an amount of P1,000,000 was spent for additional development on the mine.

The tonnage mined and estimated remaining tons for years 2014-2016 are as follows:

Tons Estimated
Year Extracted Tons Remaining

2014 0 10,000,000

2015 3,000,000 7,000,000

2016 3,500,000 2,500,000

What amount should be recognized as depletion for 2016?

a. 10,150,000
b. 11,025,000
c. 15,750,000
d. 9,450,000

DEPELETION 2015
Cost of land P28,000,000
Estimated restoration cost 2,000,000
Development cost – 2014 1,000,000
Development cost – 2015 1,000,000
Total cost 32,000,000
Residual value ( 5,000,000)
Depletable amount 27,000,000

Tons extracted in 2015 3,000,000


Remaining tons – Dec 31, 2015 7,000,000
Total estimated output - Jan 1, 2015 10,000,000

Rate in 2015 (27,000,000/10,000,000) 2.70


Depletion 2015 (3,000,000 * 2.7) 8,100,000

DEPELETION 2016
Tons extracted in 2016 3,500,000
Remaining tons – Dec 31, 2016 2,500,000
Total estimated output - Jan 1, 2016 6,000,000
Original depletable amount 27,000,000
Depletion in 2015 ( 8,100,000)
Remaining depletable amount 18,900,000

New Rate in 2016 (18,900,000/6,000,000) 3.15


Depletion 2016 (3,500,000 * 3.15) 11,025,000

You might also like