On January 1, 2020, Sapphire Mining Company purchased land with valuable natural ore deposits for P20 million. At that time, the estimated recoverable output from the mine is 4 million metric tons of ore after which the land is expected to a residual value of P3 million. To facilitate the extraction and transportation of the ore, roads were constructed amounting to P1.5 million.In 2020, two million metric tons were mined. At the end of 2021, a new estimate of remaining recoverable ore indicated 2.5 million metric tons are available. During 2021, 1.5 million metric tons were mined. How much is the depletion expense for 2020 and 2021, respectively?
On January 1, 2020, Sapphire Mining Company purchased land with valuable natural ore deposits for P20 million. At that time, the estimated recoverable output from the mine is 4 million metric tons of ore after which the land is expected to a residual value of P3 million. To facilitate the extraction and transportation of the ore, roads were constructed amounting to P1.5 million.In 2020, two million metric tons were mined. At the end of 2021, a new estimate of remaining recoverable ore indicated 2.5 million metric tons are available. During 2021, 1.5 million metric tons were mined. How much is the depletion expense for 2020 and 2021, respectively?
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 12P
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On January 1, 2020, Sapphire Mining Company purchased land with valuable natural ore deposits for P20 million. At that time, the estimated recoverable output from the mine is 4 million metric tons of ore after which the land is expected to a residual value of P3 million. To facilitate the extraction and transportation of the ore, roads were constructed amounting to P1.5 million.In 2020, two million metric tons were mined. At the end of 2021, a new estimate of remaining recoverable ore indicated 2.5 million metric tons are available. During 2021, 1.5 million metric tons were mined.
How much is the depletion expense for 2020 and 2021, respectively?
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