On July 1, 2021, Lambda Company, a calendar year entity purchased the rights to a mine. The total purchased price was P 14,000,000 of which P 2,000,000 was allocable to the land. Estimated reserves were 1,500,000 tons. Lambda expects to extract and sell 25,000 tons per month. The company purchased new equipment on July 1, 2021. The equipment was purchased for P 8,000,000 and had a useful life of 8 years. However, after all the resource is removed, the equipment will be of no use and will be sold for P 500,000. REQUIRED: 1. If sales and production conform to expectations, what is the depletion for 2021? 2. What is the depreciation of the equipment for 2021?

On July 1, 2021, Lambda Company, a calendar year entity purchased the rights to a mine. The total purchased price was P 14,000,000 of which P 2,000,000 was allocable to the land. Estimated reserves were 1,500,000 tons. Lambda expects to extract and sell 25,000 tons per month. The company purchased new equipment on July 1, 2021. The equipment was purchased for P 8,000,000 and had a useful life of 8 years. However, after all the resource is removed, the equipment will be of no use and will be sold for P 500,000. REQUIRED: 1. If sales and production conform to expectations, what is the depletion for 2021? 2. What is the depreciation of the equipment for 2021?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 8MC: On July 1, 2018, Mundo Corporation purchased factory equipment for 50,000. Residual value was...

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On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.
The following intangible assets were purchased by Goldstein Corporation: A. A patent with a remaining legal life of twelve years is bought, and Goldstein expects to be able to use it for seven years. B. A copyright with a remaining life of thirty years is purchased, and Goldstein expects to be able to use it for ten years. For each of these situations, determine the useful life over which Goldstein will amortize the intangible assets.
Comprehensive: Acquisition, Subsequent Expenditures, and Depreciation On January 2, 2019, Lapar Corporation purchased a machine for 50,000. Lapar paid shipping expenses of 500, as well as installation costs of 1,200. The company estimated that the machine would have a useful life of 10 years and a residual value of 3,000. On January 1, 2020, Lapar made additions costing 3,600 to the machine in order to comply with pollution-control ordinances. These additions neither prolonged the life of the machine nor increased the residual value. Required: 1. If Lapar records depreciation expense under the straight-line method, how much is the depreciation expense for 2020? 2. Assume Lapar determines the machine has three significant components as shown below. If Lapar uses IFRS, what is the amount of depreciation expense that would be recorded?
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