In January 2020, Mark Company purchased a mineral mine for P36,000,000 withremovable ore estimated by geological survey at 4,000,000 tons. The propertyhas an estimated value of P3,600,000 after the ore has been extracted. Theentity incurred P10,800,000 of development cost preparing the property for theextraction of ore. The entity is required to restore the property to the originalcondition at an estimated cost of P2,500,000. The present value of theestimated restoration cost is P1,800,000. During 2020, 400,000 tons wereremoved, and 300,000 tons were sold. For the year ended December 31, 2020,what amount of depletion should be included in cost of goods sold?3,375,000O 4,570,0003,427,500O 4,500,000

Depletion refers to the reducing in the value of natural resources of the earth from extraction of…

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what amount of depletion should be included in cost of goods sold? 3,375,000 O 4,570,000 O 3,427,500 4,500,000

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

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 6RE

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Question

In January 2020, Mark Company purchased a mineral mine for P36,000,000 with
removable ore estimated by geological survey at 4,000,000 tons. The property
has an estimated value of P3,600,000 after the ore has been extracted. The
entity incurred P10,800,000 of development cost preparing the property for the
extraction of ore. The entity is required to restore the property to the original
condition at an estimated cost of P2,500,000. The present value of the
estimated restoration cost is P1,800,000. During 2020, 400,000 tons were
removed, and 300,000 tons were sold. For the year ended December 31, 2020,
what amount of depletion should be included in cost of goods sold?
3,375,000
O 4,570,000
3,427,500
O 4,500,000

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