Resource Company

Required Debit Credit

2020 Rock and gravel property 960,000

Cash 960,000

Depletion (1,000,000 x .40) 400,000

Accumulated depletion 400,000

2021 Rock and gravel property 490,000

Cash 490,000

Depletion (600,000 x .75) 450,000

Accumulated depletion 450,000

Total cost (960,000+490,000) 1,450,000

Less: Accumulated depletion 400,000
Depletable amount 1,050,000
Divide by estimated remaining output (2,400,000-1,000,000) 1,400,000
Revised depletion rate per ton 0.75

2022 Rock and gravel property 500,000

Cash 500,000

Depletion (700,000 x .44) 308,000

Accumulated depletion 308,000

Total cost 1,450,000

Add: Additional development cost 500,000
Total 1,950,000
Less: Accumulated depletion (400,000+ 450,000) 850,000
Remaining depletable amount 1,100,000
Divide by new estimated remaining output 2,500,000
New depletion rate 0.44
Reliable Company

Required Debit Credit

2020 Resource property 3,960,000

Cash 3,960,000

Building 960,000
Equipment 1,240,000
Cash 2,200,000

Depletion (12,000 x .32) 384,000

Accumulated depletion 384,000

Cost of resource property 3,960,000

Less: Residual value 120,000
Depletable amount 3,840,000
Divide by estimated output 120,000
Depletion rate per unit 32

Depreciation (12,000 x 8) 96,000

Accumulated depreciation-building 96,000

Depreciation rate per unit = 960,000/120,000 = 8

The output method is used in computing the depreciation of the building because the life of
the resource property (5 years or 120,000/24,000) is shorter than the life of the building (8 years).

Depreciation 310,000
Accumulated depreciation (1,240,000/4 years-310,000) 310,000

The straight line method is used for the heavy equipment because the life of 4 years is shorter
than the life of the resource property of 5 years

2021 Depletion 800,000

Accumulated depletion (25,000 x 32) 800,000

Depreciation (25,000 x 8) 200,000

Accumulated depreciation-building 200,000

Depreciation 310,000
Accumulated depreciation equipment 310,000
Universal Company

Required Debit Credit

2020 Ore property 5,400,000

Cash 5,400,000

Ore property 450,000

Estimated liability for restoration cost 450,000

Mine improvements 8,000,000

Cash 8,000,000

2021 Depletion (600,000 x 2.60) 1,560,000

Accumulated depletion 1,560,000

Depreciation (600,000 x 4) 2,400,000

Accumulated depreciation 2,400,000

2022 Depletion (400,000 x 1.60) 640,000

Accumulated depletion 640,000

Depletable amount 5,200,000

Less: 2020 depletion 1,560,000
Balance (3,640,000/2,275,000 1.60) 3,640,000

Mine improvements 770,000

Cash 770,000

Depreciation (400,000 x 2.80) 1,120,000

Accumulated depreciation 1,120,000

Cost (8,000,000+770,000) 8,770,000

Less: Accumulated depreciation 2,400,000
Carrying amount (6.370,000/2.275,000-2.80) 6,370,000
Icon Company

Required1
Retained earnings 1,500,000
Accumulated depletion 2,500,000
Total 4,000,000
Less: Capital liquidated 1,800,000
Depletion in ending inventory (5,000 x 20) 100,000 1,900,000
Maximum dividend 2,100,000

Required2
Retained earnings 1,500,000
Capital liquidated 500,000
Dividends payable 2,000,000
Multinational Company

Required A Debit Credit

1 Cash (50,000 x 110) 5,500,000

Share capital (50,000 x 100) 5,000,000
Share premium 500,000

2 Resource property 3,000,000

Cash 3,000,000

3 Mining equipment 800,000

Cash 800,000

4 Cash (85,000 x 50) 4,250,000

Sales 4,250,000

5 Mining and other direct cost 2,268,000

Administrative expenses 500,000
Cash 2,768,000

6 Depletion 270,000
Accumulated depletion (3,000,000/1,000,000 x 90,000) 270,000

7 Depreciation (90,000 x.80) 72,000

Accumulated depreciation - mining equipment 72,000

8 Depreciation rate (800,000/1,000,000)= .80

Inventory, December 31 (5,000 x 29) 145,000

Profit and loss 145,000

Mining labor and other direct costs 2,268,000

Depletion 270,000
Depreciation 72,000
Total production costs incurred 2,610,000
Divide by number of units extracted 90,000
Unit cost 29
Required B
Multinational Company
Income Statement
December 31, 2020
Sales 4,250,000
Cost of sales
Mining labor and other direct costs 2,268,000
Depletion 270,000
Depreciation 72,000
Total production cost 2,610,000
Less: Inventory, December 31 145,000 2,465,000
Gross income 1,785,000
Administrative expenses 500,000
Net income 1,285,000

Required C
Multinational Company
Statement of Financial Position
December 31, 2020

Assets
Current assets:
Cash 3,182,000
Inventory 145,000 3,327,000
Noncurrent assets:
Resource property 3,000,000
Less: Accumulated depletion 270,000 2,730,000
Mining equipment 800,000
Less: Accumulated depreciation 72,000 728,000 3,458,000
Total assets 6,785,000

Equity
Share capital 5,000,000
Share premium 500,000
Retained carnings 1,285,000
Total equity 6,785,000

Required D
Retained earnings 1,285,000
Add: Accumulated depletion 270,000
Total 1,555,000
Less: Unrealized depletion in ending inventory (5,000 x 3) 15,000
Maximum dividend 1,540,000
Required E
Retained earnings 1,285,000
Capital liquidated 255,000
Dividends payable 1,540,000
Sunflower Company

Required1
Purchase price 50,000
Road construction 5,000,000
Improvements and development costs 750,000
Total cost 5,800,000
Residual value -600,000
Depletable amount 5,200,000

Depletion rate per unit (5,200,000/4,000,000) 1

Depletion for 2020 (500,000 x 1.30) 650,000

Depletable amount 5,200,000

Depletion in 2020 -650,000
Remaining depletable amount 4,550,000
Development costs in 2021 1,300,000
Total depletable amount-1/1/2021 5,850,000

Original estimated tons 4,000,000

Additional estimate 3,000,000
Total estimated tons 7,000,000
Extracted in 2020 -500,000
Remaining tons-1/1/2021 6,500,000

New depletion rate per unit (5,850,000/6,500,000) 0.90

Depletion for 2021 (1,000,000 x 0.90) 900,000

Required2
Cost of buildings 2,000,000
Residual value -200,000
Depreciable amount 1,800,000

Depreciation rate per unit (1.800,000/4,000,000) 0.45

Depreciation for 2020 (500,000 x 45) 225,000

In the absence of any statement to the contrary, the output method is used in computing depreciation
of mining equipment.

Depreciable amount 1,800,000

Depreciation for 2020 225,000
Remaining depreciable amount 1,575,000
Additional building in 2021 375,000
Total depreciable amount-1/1/2021 1,950,000

New depreciation rate per unit (1,950,000/6.500,000) 0.30

Depreciation for 2021 (1,000,000 x .30) 300,000

ting depreciation