DEPLETION1. Edi Wow Corporation purchased land for P6,000,000. The company expected to extract 1 million tons of mine from this land over the next 20 years at which time, residual value shall be zero. During the first 2 years of the mines operations, 30,000 tons were mined each year and sold for P80 per ton. The estimate of the total lifetime of the mine was raised to 1,200,000 tons at the start of the third year and the residual value was estimate P480,000. During the year, 50,000 tons were mind and sold for P85 per ton. How much would be the depletion expense for the third year? P215,000

Cost6,000,000Less: Depletion(1st and 2nd years) 360,000*Book Value5,640,000Less: Residual Value 480,000Depletable value5,160,000Divide: remaining new life in tons1,200,000Depletion rate per unit P4.30x units extracted 50,000Depletion expense, 3rd year 215,000

Cost6,000,000Divide: Original estimate life in units1,000,000Depletion rate per unit6x total units extracted 60,000Depletion (1st and 2nd years)P 360,000*

2. In 2015, The Purge Company paid P4,000,000 to purchase land containing a total estimated 160,000 tons of extractable mineral deposits. The estimated total value of the property after the removal of minerals is P800,000. Extraction activities began in 2016 and by the end of the year, 20,000 tons had been recovered. In 2017, studies indicated that the total mineral deposits had been underestimated by 60,000 tons. During 2017, 30,000 tons were extracted, and 28,000 tons were sold. What is the depletion rate per ton in 2017? P14.00

Depletable cost(P4M-800,000)3,200,000Divide: Original life in tons 160,000 Depletion rate per ton20

Cost4,000,000Depletion, 2006 (20,000x20) 400,000Book value3,600,000Salvage value (800,000)Depletable book value2,800,000Divide: remaining life in units 200,000*Revised depletion rate per ton P14.00

Total life160,000tonsUnderestimation 60,000Total life220,000 Expired life 20,000Remaining life200,000 tons*

3. On January 2004, Hawak Ka Mining Company obtained the rights to extract the oil from field for an initial payment of P4,000,000 plus a commitment to restore the topography of the land for an estimated cost of P2,000,000, after the extraction process has run its course. Surveys have suggested that the field contains 2,000,000 recoverable barrels of crude oil. Actual recoveries are 600,000 barrels in 2004 and 800,000 barrels in 2006. At the end of 2005, the estimated recoverable crude oil was thought to be 800,000 barrels and the cost to restore the condition of the land was now believed to be P1,800,000. Recovery in 2006 is 280,000 barrels after which the field is abandoned as agreed upon. Restoration cost is performed at a cost of 1,700,000 early in 2007. What is the amount to be credited to the accumulated depletion during 2005? How much is the book value as of December 31, 2004? What is the amount of provision for restoration cost in 2005? 2,400,000 2,200,000,200,000

Cost of drilling rights4,000,000Estimated restoration cost2,000,000Total depletable cost6,000,000Divide by: estimated no. of barrels to be rec.2,000,000Depletion per barrel of crude oil3

Cost of drilling rights4,000,000Less: Depletion 2004 (600,000x3)1,800,000Book value, December 31, 20042,200,000

Amount of depletion in 2005 (800,000 x 3)2,400,000

No. of barrels extracted:In 2004600,000in 2005800,000Total 1,400,000depletion ratex3Total depletion4,200,000Less: Capitalized cost of drilling rights4,000,000Amount of provision for restoration costTo be recognized in 2005 200,000