Rhine Minerals Ltd has exploration licenses for the areas of interest of Forest and Twiggy. Exploration and evaluation costs of $7,500,000 were incurred at Site Forest and exploration and evaluation costs of $6,000,000 were incurred at Site Twiggy during the year ended 31 December 2019. In relation to the above exploration and evaluation expenditure, 40 per cent relates to intangible assets and the balance of the expenditure relates to property, plant and equipment. At the beginning of 2020, oil of an economically recoverable nature is discovered at Site Forest, but Site Twiggy is abandoned. Production at Forest begins in 2020. Site Forest site is estimated to have 2 000 barrels. The current sale price is $21,000 per barrel. During 2020, 500 barrels are extracted at a production cost of $1,000,000 and 100 barrels are sold. REQUIRED Provide the journal entries for 2018, 2019 and 2020 using the area-of-interest method. Assume pre-production costs are amortised or depreciated using the production- output method. Exclude journal narrations,

Rhine Minerals Ltd has exploration licenses for the areas of interest of Forest and Twiggy. Exploration and evaluation costs of $7,500,000 were incurred at Site Forest and exploration and evaluation costs of $6,000,000 were incurred at Site Twiggy during the year ended 31 December 2019. In relation to the above exploration and evaluation expenditure, 40 per cent relates to intangible assets and the balance of the expenditure relates to property, plant and equipment. At the beginning of 2020, oil of an economically recoverable nature is discovered at Site Forest, but Site Twiggy is abandoned. Production at Forest begins in 2020. Site Forest site is estimated to have 2 000 barrels. The current sale price is $21,000 per barrel. During 2020, 500 barrels are extracted at a production cost of $1,000,000 and 100 barrels are sold. REQUIRED Provide the journal entries for 2018, 2019 and 2020 using the area-of-interest method. Assume pre-production costs are amortised or depreciated using the production- output method. Exclude journal narrations,

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

Chapter12: Intangibles

Section: Chapter Questions

Problem 8P

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On July 1, 2020, FREESIA Company purchased the rights to a mine for ₱13,200,000, of which ₱1,200,000 was allocable to the land. Estimated reserves were 1,500,000 tons. The entity expects to extract and sell 25,000 tons per month. The entity purchased mining equipment on July 1, 2020 for ₱9,500,000. The mining equipment had a useful life of eight years. However, after all the resources are removed, the equipment will be of no use and will be sold for ₱500,000. Questions: What is the depletion for 2020? * What is the depreciation for 2020? * Present solutions.