On January 1, 2018, Spring Co. purchased a land for $12,000,000. The company expected to extract 2,000,000 tons of mine from this land over the next 20 years at which time, the residual value of the asset shall be zero. During 2018 and 2019 operations, 60,000 tons were mined each year and sold for P80 per ton. The estimate of the remaining lifetime capacity of the mine was raised to 2,400,000 tons at the start of 2020 and the residual value was to be $960,000. How much should be recognized as depletion in 2020 if the total production for 2020 is 100,000 tons?
On January 1, 2018, Spring Co. purchased a land for $12,000,000. The company expected to extract 2,000,000 tons of mine from this land over the next 20 years at which time, the residual value of the asset shall be zero. During 2018 and 2019 operations, 60,000 tons were mined each year and sold for P80 per ton. The estimate of the remaining lifetime capacity of the mine was raised to 2,400,000 tons at the start of 2020 and the residual value was to be $960,000. How much should be recognized as depletion in 2020 if the total production for 2020 is 100,000 tons?
Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion
Section: Chapter Questions
Problem 29CE
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On January 1, 2018, Spring Co. purchased a land for $12,000,000. The
company expected to extract 2,000,000 tons of mine from this land over
the next 20 years at which time, the residual value of the asset shall be
zero. During 2018 and 2019 operations, 60,000 tons were mined each year
and sold for P80 per ton. The estimate of the remaining lifetime capacity
of the mine was raised to 2,400,000 tons at the start of 2020 and the
residual value was to be $960,000. How much should be recognized as
depletion in 2020 if the total production for 2020 is 100,000 tons?
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