On an audit engagement for 20X0, you handled the audit of fixed assets of ABC Copper Mines. This mining company bought the exploration rights of XYZ Exploration on June 30, 20X0 for P7,290,000. Of this purchase price, P4,860,000 was allocated to copper ore which had remaining reserves estimated at 1,620,000 tons. ABC Copper Mines expects to extract 15,000 tons of ore a month with an estimated selling price of P50 per ton. Production started immediately after some new machines costing P600,000 were bought on June 30, 20X0. These new machineries had an estimated useful life of 15 years with a scrap value of 10% of the cost after the ore estimated has been extracted from the property, at which time the machinery will already be useless. Among the operating expenses of ABC Copper Mines on December 31, 20X0 were: Depletion expense - 405,000 and depreciation of machinery - 40,000. Round depreciation rate to 2 decimal places. The adjusted depreciation at year-end amounted to?

On an audit engagement for 20X0, you handled the audit of fixed assets of ABC Copper Mines. This mining company bought the exploration rights of XYZ Exploration on June 30, 20X0 for P7,290,000. Of this purchase price, P4,860,000 was allocated to copper ore which had remaining reserves estimated at 1,620,000 tons. ABC Copper Mines expects to extract 15,000 tons of ore a month with an estimated selling price of P50 per ton. Production started immediately after some new machines costing P600,000 were bought on June 30, 20X0. These new machineries had an estimated useful life of 15 years with a scrap value of 10% of the cost after the ore estimated has been extracted from the property, at which time the machinery will already be useless. Among the operating expenses of ABC Copper Mines on December 31, 20X0 were: Depletion expense - 405,000 and depreciation of machinery - 40,000. Round depreciation rate to 2 decimal places. The adjusted depreciation at year-end amounted to?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 6PB: Underwoods Miners recently purchased the rights to a diamond mine. It is estimated that there are...

See similar textbooks

Similar questions

8. In connection with your audit of the ABC Mall Corporation for the year ended December 31, 20X1, you noted that the company purchased P16,640,000 mining property estimated to contain 12,800,000 tons of ore. The residual value of the property is P1,280,000. The building used in mine operations costs P1,280,000 has an estimated life of fifteen years with no residual value. Mine machinery costs P2,560,000 with an estimated residual value of P512,000 after its physical life of 4 years. Following is the summary of the company’s operations for the first year of operations.Tons mined - 1,280,000 tonsTons sold - 1,024,000 tonsUnit selling price per ton - P4.40Direct labor - 1,024,000Miscellaneous mining overhead - 204,800Operating expenses (excluding depreciation) - 921,600Inventories are valued on a first-in, first-out basis. Depreciation on the building is to be allocated as follows: 20% to operating expenses, 80% to production. Depreciation on machinery is chargeable to production. How…
12. In connection with your audit of the ABC Mall Corporation for the year ended December 31, 20X1, you noted that the company purchased P16,640,000 mining property estimated to contain 12,800,000 tons of ore. The residual value of the property is P1,280,000. The building used in mine operations costs P1,280,000 has an estimated life of fifteen years with no residual value. Mine machinery costs P2,560,000 with an estimated residual value of P512,000 after its physical life of 4 years. Following is the summary of the company’s operations for the first year of operations.Tons mined - 1,280,000 tonsTons sold - 1,024,000 tonsUnit selling price per ton - P4.40Direct labor - 1,024,000Miscellaneous mining overhead - 204,800Operating expenses (excluding depreciation) - 921,600Inventories are valued on a first-in, first-out basis. Depreciation on the building is to be allocated as follows: 20% to operating expenses, 80% to production. Depreciation on machinery is chargeable to production. How…
Colorado Mining paid $621,800 to acquire a mine with 816,000 tons of coal reserves. The horizontal statements model reflects Colorado Mining’s financial condition just prior to purchasing the coal reserves. The company extracted 428,400 tons of coal in Year 1 and 367,200 tons in Year 2. Requireda. Compute the depletion charge per unit.b. Record the acquisition of the coal reserves and the depletion expense for years 1 and 2 in a financial statements model like the preceding one.c. Prepare the general journal entries to record the depletion expense for years 1 and 2.
Mark Company hired Luke, an external consultant, to assess its oil reserves. The service was provided over a five-month period and will be settled by Mark Company issuing 100 of its shares to Luke to the value of P40,000 at issuance. Mark Company estimated the cash fair value of the service at 38,000, based on bids from other consultants. Luke, the consultant was considered an employee for tax purposes. The amount reported as expense in relation to the consultancy service is
In 20X1, ABC Co. paid P1M to purchase a land containing a total estimated 160,000 tons of extractable mineral ore. The estimated value of the property after the mineral has been removed is P200,000. Extracted operations began in late 20X1 with a total extracted ores of 20,000 tons were sold until the end of 20X2. In 20X3, geological studies indicated that the total amount of mineral deposits had been underestimated by 25,000 tons. During 20X3, 30,000 tons were extracted and 28,000 tons were sold. What is the depletion rate per ton at 20X3? (round answer to nearest centavo/ 2 decimal points)
On January 1, 2018, Lam Company, a calendar year corporation, purchased the rights to a mine. The total purchase price was 16,400,000, of which 2,000,000 was allocable to the land. Estimated reserves were 1,800,000 tons. The entity expected to extract and sell 25,000 tons per month. The entity purchased new equipment on March 1, 2018 for 7,500,000. The equipment had a useful life of 8 years. However after all the resource is removed, the equipment would be of no use and could be sold for 300,000. What amount should be recorded as depletion for 2018? What amount should be recorded as depreciation of the mining equipment for 2018?
The Weber Company purchased a mining site for $510,498 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 82,226 tons will be recovered. During the first year the company extracted 6,000 tons of ore. The depletion expense is a.$46,488.30 b.$45,615.00 c.$37,260.00 d.$33,922.34
Weber Company purchased a mining site for $690,727 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 86,719 tons will be recovered. The estimated residual value of the property is $40,504. During the first year, the company extracted 5,948 tons of ore. The depletion expense is a.$65,022.30 b.$44,598.37 c.$47,376.52 d.$40,504.00
In January, Hunter Corporation entered into a contract to acquire a new machine for its factory. The machine, which had a cash price of P300,000, was paid for as follows: Down payment .......................................... P 30,000 Note payable in 10 equal monthly installments ......... 240,000 1,000 shares of Hunter common stock with an agreed value of P50 per share .............................. 50,000 Total ................................................. P320,000 Your audit disclosed that prior to the machine's use, installation costs of P8,000 were incurred. The machine has an estimated useful life of ten years and an estimated salvage value of P10,000. As auditor of the corporation, what should Hunter record as depreciation expense for the first year under the straight-line method? Select one: a. P30,000 b. P31,000 c. P29,800 d. P31,800
On July 1, 2015, Lam Company, a calendar year corporation, purchased the rights to mine. The total purchase price was P16,400,000, of which P2,000,000 was allocated to the land. Estimated reserves were 1,800,000 tons. The entity expects to extract and sell 25,000 tons per month. The entity purchased new equipment on July 1, 2015 for P7,500,000. The equipment had a useful life of 8 years. However, after all the resources is removed, the equipment would be of no use and could be sold for P300,000.What amount should be recorded as depreciation of the mining equipment for 2015?
LM Corporation purchased 20 acres of land for P120,000,000. The company expects to extract 5 million tons of minerals from this land over the next 20 years, at which time, residual value shall be P6,000,000. The following costs were also incurred related to the mining activities: Successful exploration costs, P10,000,000 and cost of P1,600,000 for dry wells. During the first 2 years of the mine's operations, 300,000 tons were mined each year and sold for P80 per ton. How much would be the depletion for the second year? Kindly show the solution please, thanks!
ABC Corporation purchased an island that supposedly has commercially extractable oil. The purchase price was P10,000,000. It paid surveying fees of P500,000, successful exploration costs of P400,000 and unsuccessful exploration costs of P50,000. ABC opted to use the full cost method. After these explorations, it was able to establish the island's technical feasibility and commercial viability. Subsequent costs during the month of March include drilling cost of P200,000, trenching cost of P400,000 and other development costs of P400,000. It extracted 30,000 tons of oil from March to December. The estimated remaining oil as of December 31 is 510,000 tons. If the island can be sold at P1,000,000 after extraction, how much is the depletion expense for the year?