Title | Copy of SOL. MAN. Chapter 17 Depletion OF Mineral Resources IA PART 1B |
---|---|
Author | John Mark Dag-uman |
Course | Intermediate accounting |
Institution | Highland Community College (Kansas) |
Pages | 6 |
File Size | 131.9 KB |
File Type | |
Total Downloads | 203 |
Total Views | 685 |
Chapter 17Depletion of Mineral ResourcesPROBLEM 1: TRUE OR FALSE1. FALSE2. TRUE3. TRUE4. FALSE5. TRUE6. TRUE7. TRUE8. TRUE9. FALSE10. TRUEPROBLEM 2: FOR CLASSROOM DISCUSSION1. B2. C3. D4. C5. C6. D7. Solutions: Requirement (a): 500,000 + 500,000 = 1,000,000 x 500/2,000= 250,Requirement (b): 250,000 ...
Chapter 17 Depletion of Mineral Resources
PROBLEM 1: TRUE OR FALSE 1. FALSE 2. TRUE 3. TRUE 4. FALSE 5. TRUE 6. TRUE 7. TRUE 8. TRUE 9. FALSE 10. TRUE PROBLEM 2: FOR CLASSROOM DISCUSSION 1. B 2. C 3. D 4. C 5. C 6. D 7. Solutions: Requirement (a): 500,000 + 500,000 = 1,000,000 x 500/2,000= 250,000 Requirement (b): 250,000 x (300,000 oz. sold / 500,000 oz. extracted) = 150,000 8.
Solution: (10M – 3M) x 6/10 + 3M = 7,200,000 carrying amount on Jan. 1, 20x3; (7.2M – 3M residual value) = 4.2M new depletion base x 1.5M/7.5M = 840,000
9. Solutions: Requirement (a): (13.2M – 400K) x [(25K x 6 months) / 1.6M] = 1,200,000 Requirement (b): 1,600,000 / (25,000 x 12mos.) = 5.33 years life of the mine 5.33 years life of the mine vs. 8-year life of equipment
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Since the life of the mine is shorter than the life of the equipment, the output method is used in computing depreciation.
(6.6M – 200K)/ x [(25K x 6 months) / 1.6M] = 600,000
PROBLEM 3: EXERCISE 1.
Solution:
Acquisition costs .................................... Restoration costs .................................... Residual value--land ................................. Development costs .................................... Building ............................................. Salvage value--building ..............................
₱5,600,000 800,000 (640,000) 560,000 88,000 (8,000) ₱6,400,000
₱6,400,000/4,000,000 tons = ₱1.60 per ton 2001:
700,000 tons x ₱1.60 = ......................
₱1,120,000
2002:
Original cost ............................... Additional costs--2002 ......................
₱6,400,000 272,000 6,672,000 (1,120,000) ₱5,552,000
Estimated depletion--2001 ................... Balance subject to depletion ................ ₱5,552,000/3,300,000 tons = ₱1.68 per ton (rounded) 900,000 tons x ₱1.68 = ..............................
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₱1,512,000
PROBLEM 4: CLASSROOM ACTIVITY Solutions: Requirement (a): Answer: February 14, 20x1 to July 1, 20x3.
Requirement (b): 20x1 to 20x3 Deferred exploration costs – Site A 1,970,000,000 Cash 1,970,000,000 to record the exploration costs as exploration and evaluation assets (in accordance with the Company’s policy) Deferred exploration costs – Site B Cash
2,020,000,000 2,020,000,000 Site A (in , 000,000s) 1,000 60 560 350 1,970
Property rights License and legal fees Submersible pumps Other exploration costs Deferred exploration costs
Site B (in , 000,000s) 1,200 90 450 280 2,020
July 1, 20x3 Exploration expense – Site B 2,020,000,000 Deferred exploration costs – Site B 2,020,000,000 to charge as expense the deferred exploration costs on Site B where no mineable ore has been discovered
Mine development costs – Site A 1,970,000,000 Deferred exploration costs – Site A 1,970,000,000 to reclassify the deferred exploration costs in Site A to mine development costs Mine development costs – Site A 1,100,000,000 Cash 1,000,000,000 to record subsequent intangible development costs
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Cash
200,000,000 Mine development costs – Site A 200,000,000 to record the income generated during the development phase as reduction to the capitalized mine development costs
Dec. 31, 20x3 Mine and mining properties – Site A 2,914,770,000 Mine development costs – Site A 2,870,000,000(a) Provision for decommissioning costs 44,770,000 to reclassify the capitalized mine development costs to mine and mining properties, which shall be subsequently subjected to depletion (a)
(1,970,000,000 + 1,100,000,000 – 200,000,000) = 2,870,000
Dec. 31, 20x4 Inventory (Depletion) 614,249,400 Accumulated depletion (2,914,770,000 x 22%) to recognize the depletion charge for the period
PROBLEM 5: MULTIPLE CHOICE - THEORY 6. A 1. B 7. D 2. A 8. C 3. A 9. D 4. D 10. A 5. C
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614,249,400
PROBLEM 6: MULTIPLE CHOICE - COMPUTATIONAL 1. B Solution: Purchase cost of mine PV of restoration costs Development costs
2,640,000 180,000 360,000
Residual value
(300,000)
Depletion base
2,880,000
Estimated reserves Depletion rate Actual tons extracted Depletion
1,200,000 2 60,000 144,000
2. C Purchase cost of mine
7,200,000
Development costs
2,160,000
Residual value
(720,000)
Depletion base
8,640,000
Estimated reserves Depletion rate Tons sold Depletion in COGS
4,320,000 2 480,000 960,000
3. A Solution: 1,000,00 0 (100,000 ) 900,00 0 (200,000 ) 700,000 165,000 4.24
Purchase cost of mine Accumulated depletion - 1/1/x3 Carrying amount - 1/1/x3 Residual value Revised depletion base - 1/1/x3 Revised estimate of reserves a Revised depletion rate - 20x3 5
a
The revised estimate of reserves is computed as follows: Original estimate of reserves 160,000 Understatement of total estimate 25,000 Tons extracted in 20x2 (20,000) Remaining reserves - 1/1/x3 165,000
4. C Solution: Retained earnings Cash dividends declared Liquidating dividends 5.
600,000 (800,000) (200,000)
B (₱9M + ₱1.5M – ₱1M) ÷ 2.5M tons = 3.8
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