Reference no: EM132776039
Question - Benguet Mining Corporation purchased a mining property for P10,400,000, estimated to contain 8,000,000 tons of ore on January 1, 2019. The residual value of the property was estimated at P800,000. Building used in mine operations costs P2,400,000 and have estimated life of 15 years with no residual value. Mine machinery costs P1,600,000 with an estimated residual value of P320,000 after physical life of 4 years. The following is the summary of the company's operations for the first year and second year of operations:
2020 2019
Tons mined 800,000 500,000
Tons sold 720,000 440,000
Unit selling price per ton P4.40 P4.40
Direct labor P640,000 P400,000
Misc. mining overhead P128,000 P90,000
Operating expense except depreciation P576,000 P375,000
The company estimates an average annual production of 800,000 tons. Inventories are valued on a first-in, first-out basis. Depreciation on the building is to be allocated as follows: 20% to operating expenses, 80% to production. Depreciation to machinery is entirely chargeable to production. Total dividends paid in 2016 amounted to P500,000. Dividends is yet to be declared in 2020.
Required -
1. Compute the total depletion in 2020.
2. Total INVENTORIABLE depreciation (depreciation to be added to inventory cost).
3. Compute for the COST OF SALES for the year ended December 31, 2020.
4. Compute the Net Income for 2020.
5. Compute the MAXIMUM DIVIDEND that can be declared in 2020.