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Sol. Man. - Chapter 17 - Depletion of Mineral Resources - Ia Part 1B

This document contains sample problems and solutions related to accounting for the depletion of mineral resources. Problem 1 contains true/false questions, Problem 2 discusses issues for classroom discussion, and Problems 7-9 provide computational exercises with step-by-step solutions for depletion accounting relating to mines. Problem 6 contains multiple choice questions testing the computation of depletion costs. The problems and solutions cover topics such as calculating depletion rates and depletion costs, revising depletion estimates, and computing depletion amounts.

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Mahasia MANDIGAN
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1K views3 pages

Sol. Man. - Chapter 17 - Depletion of Mineral Resources - Ia Part 1B

This document contains sample problems and solutions related to accounting for the depletion of mineral resources. Problem 1 contains true/false questions, Problem 2 discusses issues for classroom discussion, and Problems 7-9 provide computational exercises with step-by-step solutions for depletion accounting relating to mines. Problem 6 contains multiple choice questions testing the computation of depletion costs. The problems and solutions cover topics such as calculating depletion rates and depletion costs, revising depletion estimates, and computing depletion amounts.

Uploaded by

Mahasia MANDIGAN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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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

1
 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 6: MULTIPLE CHOICE - COMPUTATIONAL


1. B
Solution:

Purchase cost of mine 2,640,000


PV of restoration costs 180,000
Development costs 360,000

Residual value (300,000)

Depletion base 2,880,000

Estimated reserves 1,200,000


Depletion rate 2
Actual tons extracted 60,000
Depletion 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 4,320,000


Depletion rate 2
Tons sold 480,000
Depletion in COGS 960,000

3. A
Solution:
1,000,00
Purchase cost of mine 0
Accumulated depletion - 1/1/x3 (100,000

2
)
900,00
Carrying amount - 1/1/x3 0
(200,000
Residual value )
Revised depletion base - 1/1/x3 700,000
Revised estimate of reserves a 165,000
Revised depletion rate - 20x3 4.24

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 600,000
Cash dividends declared (800,000)
Liquidating dividends (200,000)

5. B (₱9M + ₱1.5M – ₱1M) ÷ 2.5M tons = 3.8

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