Radical Company acquired a mineral right for P30,000,000 January 2020. The mine has a recoverable ore estimated 1,000,000 tons. After it has extracted all the ore, the entity will be required aw to restore the land to the original condition at a discoun amount of P2,000,000. The entity believed that the prope can be sold afterwards for P5,000,000.
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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- The following intangible assets were purchased by Goldstein Corporation: A. A patent with a remaining legal life of twelve years is bought, and Goldstein expects to be able to use it for seven years. B. A copyright with a remaining life of thirty years is purchased, and Goldstein expects to be able to use it for ten years. For each of these situations, determine the useful life over which Goldstein will amortize the intangible assets.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 4,500,000At the beginning of the current year, JKL Company purchased a mineral mine for P26,400,000 with removable ore estimated at 1,200,000 tons. After it has extracted all the ore, the entity will be required by law to restore the land to its original condition at an estimated cost of P2,100,000. The present value of the estimated restoration cost is P1,800,000. The entity believed that it will be able to sell the property afterwards for P3,000,000. During the current year, the entity incurred P3,600,000 of development cost preparing the mine for production, removed 80,000 tons of ore and sold 60,000 tons. Determine the total amount of depletion should be recorded for the current year. 1,920,000 b. 1,440,000 c. 1,940,000 d. 1,455,000
- On January 1, 2021, Annie Company purchased a mineral mine for P26,400,000 with removable ore estimated at 1,200,000 tons. After it has extracted all the ore, the entity will be required by law to restore the land to its original condition at an estimated cost of P2,200,000. The present value of the estimated restoration cost is P1,800,000. The property can be sold afterwards for P3,000,000. During 2021, the entity incurred P2,000,000 exploration cost and P1,600,000 development cost preparing the mine for production. The entity removed 80,000 tons of ore and sold 60,000 tons of ore in 2021. What amount of depletion should be included in cost of sales for 2021?On January 1, 2022, Annie Company purchased a mineral mine for P26,400,000 with removable ore estimated at 1,200,000 tons. After it has all the ore, the entity will be required by law to restore the land to its original condition at an estimated cost of P2,200,000. The present value of the estimated restoration cost is P1,800,000. The property can be sold afterwards for P3,000,000. During 2021, the entity incurred P2,000,000 exploration cost and P1,600,000 development cost preparing the mine for production. The entity removed 80,000 tons of ore and sold 60,000 tons of ore in 2022. What amount of depletion should be included in the cost of sales for 2022? А. 1,920,000 B. 1,440,000 С. 1,500,000 D. 1,590,000On January 1, 2020, Hilary Company purchased a mineral mine for P26,400,000 with removable ore estimated at 1,200,000 tons. After it has extracted all the ore, the entity will be required by law to restore the land to the original condition at an estimated cost of P2,200,000. The present value of the estimated restoration cost is P1,800,000. The property can be sold afterwards for P3,000,000. During 2020, the entity incurred P2,000,000 exploration cost and P1,600,000 development cost preparing the mine for productions. The entity removed 80,000 tons of ore and sold 60,000 tons of ore in the current year. What amount of depletion should be included in cost of sales for the current year? 1,920,000 1,440,000 1,455,000 1,940,000 What is the depletion for the current year? 1,920,000 1,440,000 1,940,000 1,455,000
- On July 1, 2022, Trisha Company purchased the rights to a mine for P13,200,000, of which P1,200,000 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, 2022 for P9,500,000. The mining equipment had a useful life of 8 years. However, after all the resource is removed, the equipment will be of no use and will be sold for P500,000. 1. What is the depletion for 2022? A. 2,400,000 B. 1,200,000 C. 2,640,000 D. 1,320,000 2. What is the depreciation for 2022? A. 1,800,000 B. 1,125,000 C. 900,000 D. 562,500• Hall, Inc. purchases an asset for $3,000,000. As of December 31, 2021, the Accumulated Depreciation on the asset is $1,200,000. Based on technological changes, Hall decides to test the asset for impairment. Estimated undiscounted future cash flows from the project are $1,500,000. The Fair Value of the asset is estimated at $982,288. The journal entry related to this asset will include: Credit to Accumulated Depreciation of $300,000. O Debit to Loss of $817,712. O Debit to Loss of $851,444. O No impairment necessary.Maxine Ltd acquired a mining property in Victoria, called Clarity for $13 million on 1 July 2018 and treated it as an area of interest. Maxine Ltd incurred the costs as below: Year Details $ Amount August 2018 Right to explore 450,000 2018 – 2019 Exploratory study and drilling 3,200,000 At the beginning of calendar year 2019, the technical feasibility and commercial viability of mining the diamond deposit were confirmed. The company's experts estimated that there were 10 million carats of diamonds could be commercially exploited. From March 2019 to June 2019, the company undertook the following capital investments: Costs Estimated Life (as at 30 June 2019) Mine buildings $4,600,000 20 years Processing plant $2,700,000 5 years Other equipment $3,010,000 14 years Mine buildings cannot be economically removed from the mine location, but the processing plant and other equipment can be economically removed and have alternative uses. On 30 June 2019, Maxine Ltd estimated that the costs of…
- 16.Entity D acquired a property in 2021 which contains mineral deposit. The acquisition cost of the property was P20,000,000. After acquisition, the following costs were incurred: Exploration cost P13,000,000; Development cost related to drilling wells P10,000,000; Development cost related to production equipment P15,000,000. For P2,000,000, the entity is legally required to restore the land to a condition appropriate for resale. It is estimated that the property can be sold for P5,000,000 following mineral extraction. Geological estimates indicate that 5,000,000 tons of mineral may be extracted. The entity extracted 600,000 tons of the mineral in 2021 and sold 450,000 tons. How much is the depletion included in the entity's inventory at Dec 31, 2021?Problem 28-9 (AICPA Adapted) purchased a mineral mine for P36,000,000 with removable At the beginning of current year, Handsome Company ore estimated by geological survey at 2,160,000 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 costs preparing the property for the extraction of ore. During the current year, 270,000 tons were removed and 240,000 tons were sold. What amount of depletion should be included in cost of goods sold for the current year? a. 3,600,000 b. 4,050,000 c. 4,800,000 d. 5,400,00015 Clegane Company had the following acquisitions of intangible assets in 2022: Franchise On January 31, 2022, Clegane signed an agreement to operate as franchisee of Clear Copy Service, Inc. for an initial franchise of P780,000. Of this amount, P300,000 was paid when the agreement was signed and the balance was payable in four annual payments of P120,000 each, beginning January 31, 2023. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The implicit rate for loan of this type is 12%. The agreement also provides the 1.5% of the revenue from the franchise must be paid to the franchisor annually. Clegane’s revenue from the franchise in 2022 was P9,500,000. Clegane estimates the useful life of the franchise to be ten years. At the end of 2022, the franchise recoverable amount was P610,000. Trademark On March 1, 2022 Clegane purchased for P400,000 a trademark for a very successful soft drink it markets under the name…