se 9.11 (Algo) Depletion of
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Exercise 9.11 (Algo) Depletion of Natural Resources (LO9-7) Salter Mining Company purchased the Northern Tier Mine for $88 million cash. The mine was estimated to contain 1.45 million tons of ore and to have a residual value of $1.4 million. During the first year of mining operations at the Northern Tier Mine, 95,000 tons of ore were mined, of which 18,000 tons were sold. a. Prepare a
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- 14. In January 20X1, ABC Mining Corporation purchased a mineral mine for P7,200,000 with removable ore estimated by geological surveys at 4,320,000 tons. The property has an estimated value of P720,000 after the ore has been extracted. ABC incurred P2,160,000 of development costs preparing the property for the extraction of ore. During 20X1, 540,000 tons were removed and 480,000 tons were sold. For the year ended December 31, 20X1, ABC should include what amount of depletion chargeable to ore inventory?5. In January 20X1, ABC Mining Corporation purchased a mineral mine for P7,200,000 with removable ore estimated by geological surveys at 4,320,000 tons. The property has an estimated value of P720,000 after the ore has been extracted. ABC incurred P2,160,000 of development costs preparing the property for the extraction of ore. During 20X1, 540,000 tons were removed and 480,000 tons were sold. For the year ended December 31, 20X1, ABC should include what amount of depletion in its cost of goods sold?Journalizing natural resource depletion Cannon Mountain Mining paid $462,300 for the right to extract mineral assets from a 400,000-ton deposit. In addition to the purchase price, Cannon also paid a $900 filing fee, a $1,800 license fee to the state of Nevada, and $55,000 for a geological survey of the property. Because Cannon purchased the rights to the minerals only and did not purchase the land, it expects the asset to have zero residual value. During the first year, Cannon removed and sold 50,000 tons of minerals. Make journal entries to record (a) purchase of the minerals (debit Minerals), (b) payment of fees and other costs, and (c) depletion for the first year.
- 9. XYZ Company quarries limestone, crushes it, and sells it to be used in road building. XYZ paid P10,000,000 for a certain quarry. The property can be sold for P3,000,000 after production ceases. Estimated reserves 10,000,000; Tons quarried through December 31, 20X4 4,000,000; Tons quarried in 20X5 1,500,000. An engineering study performed in 20X5 indicated that as of January 1, 20X5, 7,500,000 tons of limestones were available. 30. Assume that the materials and labor cost incurred during 20X5 is 2,160,000 and that 1,000,000 tons were sold during the year at P5.00, Gross Profit for the year is?10. In 20X4, ABC Mining Inc. purchased land for P5,600,000 that had a natural resource supply estimated at 4,000,000 tons. When the natural resources are removed, the land has an estimated value of P640,000. The required restoration cost for the property is estimated to be P800,000. Development and road construction costs on the land were P560,000, and a building was constructed at a cost of P88,000 with an estimated P8,000 salvage value when all the natural resources have been extracted. During 20X5, additional development costs of P272,000 were incurred, but additional resources were not discovered. Production for 20X4 and 20X5 was 700,000 tons and 900,000 tons, respectively. Round depletion rate to 2 decimal places. Depletion for 20X5 is?8. ABC has determined that one of its cash generating units (CGU) is impaired. The assets of the CGU at their book value are: Land – 4,000,000; Factory – 1,200,000; Machinery and Equipment – 1,800,000. The value in use of the cash generating unit is P5,500,000. The factory’s fair value is P1,000,000. The impairment loss allocated to Machinery and Equipment is? (do not round off the percentage, round off your final answer to the nearest peso)
- 7. In 20X4, ABC Mining Inc. purchased land for P5,600,000 that had a natural resource supply estimated at 4,000,000 tons. When the natural resources are removed, the land has an estimated value of P640,000. The required restoration cost for the property is estimated to be P800,000. Development and road construction costs on the land were P560,000, and a building was constructed at a cost of P88,000 with an estimated P8,000 salvage value when all the natural resources have been extracted. During 20X5, additional development costs of P272,000 were incurred, but additional resources were not discovered. Production for 20X4 and 20X5 was 700,000 tons and 900,000 tons, respectively. Round depletion charge to the nearest cent. On 20X4, depletion charge is?F150 Company has the following information pertaining to its mining operations: Estimated cost of restoring property after mining is completed 400,000 Number of tons mined during the current year 50,000 tons Cost of land 6,000,000 Estimated number of tons of ores mined 400,000 tons Sales value of the land after mining 300,000 Development costs incurred 500,000 Number of tons sold during the current year 35,000 tons Cost of production (excluding depletion) P 7.00 The company already recognized the estimated restoration cost immediately after the resource property was acquired. How much would be the company’s cost of goods sold? a. 525,000 c. 787,500 b. 603,700 d. 822,50016. The intangible assets section of Pride Company at Dec.31, 2010 is presented below: Intangible assets Patent ($300,000 cost less $30,000 amortization) $270,000 Franchise ($180,000 cost less $72,000 amortization) $108,000 Goodwill $150,000 $528,000 The patent was acquired in January 2010 and has a useful life of 10 years. The franchise was acquired in January 2007 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2011. Jan2 Paid $135,000 legal costs to successfully defend the patent against infringement by another company. Jan - June Developed a new product, incurring $690,000 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life. Aug.1 Paid for commercial advertising $125,000 for the company’s product. Oct.1 Acquired a franchise for $600,000. The franchise has a useful life of 50 years Instructions: a) Prepare journal entries…
- 13. ABC Company purchased a tract of resource land in 20X0 for 39,600,000. The content of the tract was estimated at 1,200,000 units. When the resource has been exhausted, it is estimated that the land will be worth 1,200,000. Fixed installations were set up at a cost of 9,600,000. Mining equipment was purchased on January 1, 20X1 for 12,400,000. The life of the fixed installations is 8 years and the equipment, 4 years. In 20X1,120,000 units have been extracted. This was one-half of the annual extraction, which can be expected following the first year of operations. ABC Company should record depletion for 20X1 atProblem 8No Control Mining purchased land on February 1, 2019, at a cost of P1,250,000. It estimated that a total of 60,000 tons of mineral was available for mining. After it has removed all the mineral resources, the company will be required to restore the property to its previous state because of strict environmental protection laws. It estimates the fair value of this restoration obligation at P90,000. It believes it will be able to sell the property afterwards for P100,000. It incurred developmental costs of P200,000 before it was able to do any mining. In 2019, resources removed totaled 30,000 tons. The company sold 24,000 tons.RequiredCompute the following information for 2019.a. Per unit mineral cost.b. Total material cost of December 31, 2019, inventory.c. Total materials cost in cost of goods sold at December 31, 2019.8. On January 1, 2018, Stefan company purchased a mining site that will have to be restored to certain specifications when the mining production ceases. The cost of the mining site is 6,000,000 and the restoration cost is expected to be 1,500,000. It is estimated that the mine will continue in operation for 10 years. The appropriate discount rate is 8%. The present value of 1 at 8% for 10 periods is 0.4632. On December 31, 2027, the entity contracted with another entity for the restoration of the mining site in accordance with specifications at a cost of 1,350,000. How much is the decommissioning liability on January 1, 2018?
