Practical Accounting Problem by Mr. Valix

DEPLETION

1Hariet Company is involved in the exploration for mineral rights. During the current year, Harriet Company incurred the following expenditures:

Exploratory drilling for minerals on site 2,000,000

Roads and infrastructure to access exploration site 3,500,000

Expenditures relating to the subsequent development

of the resources 3,400,000

At what amount should exploration assets be initially recognized?

2Samantha Company is involved in the exploration for mineral resources. The accounting policy is to recognize exploration assets and measure them initially at cost. At the end of the current year, the following amounts were extracted from the financial statements:

Trending and sampling expenditure 1,000,000

Drilling rigs used for exploration, carrying amount 2,000,000

Drilling rigs used for exploration, depreciation expense 300,000

What amount of intangible exploration assets should be recognized in the financial statements?

3At the beginning of the current year, Vorst Company purchased a mineral mine for P26, 400,000 tons with removable ore estimated at 1,200,000 tons. After it has extracted all the ore, Vorst 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. Vorst believed that it will be able to sell the property afterwards for P 3,000,000.

During the current year, Vorst incurred P 3,600,000 of development cost preparing the mine for production, removed 80,000 tons of ore and sold 60,000 tons.

What total amount of depletion should be recorded for the current year?

4In January 2011, Huff Mining Company purchased a mineral mine for P 36,000,000 with removable ore estimated by geological survey at P 2,160,000 tons. The property has an estimated value of P 3,600,000 after the ore has been extracted. Huff incurred P 10,800,000 of development cost preparing the property for the extraction of ore. During 2011, 270,000 tons were...