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    Quiz - Wasting Assets - EQUIPADO

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    arvs
    The document provides information about Karen Company's acquisition of land containing ore and related wasting assets in 2018. It asks how much the depletion for 2018 is (1,875,000) and how much depreciation is for movable (100,000) and immovable (125,000) equipment that year. Additional information is given about assets acquired in 2015, asking the accumulated depletion for immovable equipment in 2017 (1,550,000) and depreciation expense for immovable equipment in 2018 (287,500).

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    Quiz - Wasting Assets - EQUIPADO

    Uploaded by

    arvs
    720 views2 pages
    The document provides information about Karen Company's acquisition of land containing ore and related wasting assets in 2018. It asks how much the depletion for 2018 is (1,875,000) and how much depreciation is for movable (100,000) and immovable (125,000) equipment that year. Additional information is given about assets acquired in 2015, asking the accumulated depletion for immovable equipment in 2017 (1,550,000) and depreciation expense for immovable equipment in 2018 (287,500).

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    The document provides information about Karen Company's acquisition of land containing ore and related wasting assets in 2018. It asks how much the depletion for 2018 is (1,875,000) and how much depreciation is for movable (100,000) and immovable (125,000) equipment that year. Additional information is given about assets acquired in 2015, asking the accumulated depletion for immovable equipment in 2017 (1,550,000) and depreciation expense for immovable equipment in 2018 (287,500).

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    720 views2 pages

    Quiz - Wasting Assets - EQUIPADO

    Uploaded by

    arvs
    The document provides information about Karen Company's acquisition of land containing ore and related wasting assets in 2018. It asks how much the depletion for 2018 is (1,875,000) and how much depreciation is for movable (100,000) and immovable (125,000) equipment that year. Additional information is given about assets acquired in 2015, asking the accumulated depletion for immovable equipment in 2017 (1,550,000) and depreciation expense for immovable equipment in 2018 (287,500).

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    © All Rights Reserved
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    Olivarez College

    Wasting Assets
    Quiz

    1. In 2018, Karen Company acquired a land containing ore for a total cost of Php 4,000,000. Exploration cost
    amounted to Php 6,000,000 while intangible development cost amounted to Php 5,000,000. Movable
    tangible equipment costs for heavy equipment totaled Php 2,000,000 while immovable tangible equipment
    costs amounted to Php 1,000,000. Appropriate offices estimate that the total units estimated to be extracted
    is 4,000,000. It is estimated that 500,000 units will be extracted each year during the useful life of wasting
    assets. The movable equipment has a useful life of 20 years while the immovable equipment has an
    estimated useful life of 10 years. Actual units extracted during 2018 are 500,000 units.

    Required: Based on the above facts, answer the following:


    1. How much is the depletion in 2018?

    Acquisition cost 4,000,000  

    Exploration cost 6,000,000  

    Intangible development cost 5,000,000  

    Total costs of wasting asset 15,000,000  

         

    Estimated total units to be extracted 4,000,000  

    Depletion rate per unit 15,000,000/4,000,000 3.75

    2018 depletion 500,000*3.75          1,875,000 

    2. How much is the 2018 depreciation of the movable equipment?

    Cost 2,000,000  

    Useful life 20  

    Annual depreciation 2,000,000/20              100,000 

    3. How much is the 2018 depreciation of the immovable equipment?

      Useful life of wasting asset 4,000,000units/500,000 units p.a 8

    Estimated useful life of immovable equipment 10


    Since the useful life of the wasting asset is lower than the useful life of the immovable
    equipment, we use the output method of depreciation.
     
    Depreciation per unit 1,000,000/4,000,000 0.25

    Depreciation for 2018 500,000 units extracted*0.25              125,000 


    2. In 2015, Karen Company acquired a land containing ore for a total cost of Php 60,000,000. Immovable
    tangible equipment costs totaled Php 5,000,000. Geologist estimates that the total units estimated to be
    extracted is 2,000,000. It is estimated that 200,000 units will be extracted each year during the useful life
    of the wasting assets. The immovable equipment has a 15 years useful life. Actual units extracted during
    the years 2015 to 2017 totaled 620,000 units. In 2019, the company resumed operation and there were
    150,000 units extracted.

    Required: Based on the above facts, answer the following:


    1. How much is the 2017 accumulated depletion of the immovable equipment?

    Useful life of equipment > useful life of wasting assets = use unit production method.
    (15 years > 10 years*)

    2,000,000 cost/200,000 estimated extraction per year = 10 years


    5,000,000/2,000,000 units = 2.5 per unit
    2.5 per unit x 620,000 actual units extracted from 2015-2017
     The answer is 1,550,000

    2. How much is the 2018 depreciation of the immovable equipment?

    Cost of equipment  5,000,000

    Less: accumulated depreciation 1,550,000

    Carrying Amount 1/1/18 3,450,000

    Divide by remaining useful life 12

    Depreciation expense 2018 287,500

    The End!

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