Scribd
Upload
53 views3 pages

Total Cost of Natural Resource: Depletion 250,000

1. The document provides solutions to problems regarding depletion and depreciation calculations for a mining company. 2. For Problem 1, it calculates depletion expense of ₱150,000 for minerals extracted during the period based on a depletion rate per unit of 0.5. 3. For Problem 2, it calculates depletion expense for 20x3 of ₱840,000 based on a revised depletion rate per unit of 0.56 and actual units extracted of 1,500,000.

Uploaded by

Fenladen Ambay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
53 views3 pages

Total Cost of Natural Resource: Depletion 250,000

1. The document provides solutions to problems regarding depletion and depreciation calculations for a mining company. 2. For Problem 1, it calculates depletion expense of ₱150,000 for minerals extracted during the period based on a depletion rate per unit of 0.5. 3. For Problem 2, it calculates depletion expense for 20x3 of ₱840,000 based on a revised depletion rate per unit of 0.56 and actual units extracted of 1,500,000.

Uploaded by

Fenladen Ambay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

Ambay, Fenladen C.

ACD – AEC12
TASK 2 July 16, 2021

Problem 1.
1. FALSE 6. TRUE
2. TRUE 7. TRUE
3. TRUE 8. TRUE
4. FALSE 9. FALSE
5. TRUE 10. TRUE

Problem 2.
7. Depletion of mineral resources
Requirements:
a. Depletion charge during the period.
SOLUTION:
Total cost of natural resource is computed as follows:
Purchase price of mineral rights ₱ 500,000
Exploration costs 500,000
Total cost of natural resource ₱ 1,000,000

Depletion rate per unit = Depletion base ÷ Total estimated deposits


Depletion rate per unit = ₱ 1,000,000 ÷ 2,000,000
Depletion rate per unit = 0.50

Depletion = Depletion rate per unit x Actual units extracted


Depletion = 0.50 x 500,000oz.
Depletion = 250,000

b. Depletion recognized as expense during the period.


SOLUTION:
Formula: Unit sold x Depletion rate per unit
= 300,000oz. sold x 0.50
= 150,000
300,000oz. sold
Alternative solution: 250,000 x = 150,000
500,000oz. extracted
8. Changes in estimates
Requirement: How much is the depletion in 20x3?
SOLUTION:
The total cost of natural resource is computed as follows:
Acquisition cost ₱ 10,000,000
Total cost of natural resource 10,000,000
Residual value (3,000,000)
Depletion base – 20x0 ₱ 7,000,000

Depletion rate per unit = Depletion base ÷ Total estimated deposits


Depletion rate per unit = ₱ 7,000,000 ÷ 10,000,000
Depletion rate per unit = 0.70

Accumulated depletion = Total units extracted x Depletion rate per unit


Accumulated depletion = 4,000,000 x 0.70
Accumulated depletion = 2,800,000

Cost of natural resource ₱ 10,000,000


Accumulated depletion 2,800,000
Carrying amount – Jan. 1, 20x3 7,200,000
Residual value (3,000,000)
Depletion base – 20x3 4,200,000
Divide: Revised recoverable reserves 7,500,000
Depletion rate per unit – 20x3 0.56
Multiply: Actual units extracted – 20x3 1,500,000
Depletion for 20x3 ₱ 840,000

9. Depreciation of mining equipment


Requirements:
a. Depletion for the year ended December 31, 20x1.
SOLUTION:
Acquisition cost ₱ 13,200,000
Total cost of natural resource 13,200,000
Residual value (400,000)
Depletion base ₱ 12,800,000

Depletion rate per unit = Depletion base ÷ Total estimated deposits


Depletion rate per unit = ₱ 12,800,000 ÷ 1,600,000
Depletion rate per unit = 8
Depletion = Depletion rate per unit x Actual units extracted
Depletion = 8 x 150,000 (25,000 x 6 months)
Depletion = 1,200,000

b. Depreciation for the year ended December 31, 20x1.


SOLUTION:
Life of immovable tangible equipment = 8 years
Life of mine in years = 5.33 years (*)
* Life of mine in years = Total estimated deposits ÷ Expected annual extraction
Life of mine in years = 1,600,000 ÷ 300,000 (25,000 x 12 months)
Life of mine in years = 5.33 years
Life of immovable tangible equipment is longer.
Cost of immovable tangible equipment (6,600,000 - 200,000) ₱ 6,400,000
Divided by: Total estimate deposits 1,600,000
Depreciation rate per unit 4

Depreciation = Depreciation rate per unit x Actual units extracted


Depreciation = 4 x 150,000 (25,000 x 6 months)
Depreciation = 600,000

You might also like