Reference no: EM132913785
Question - On January 1, 2020, A Company purchased a mining property for P5,200,000 with an estimated residual value of P400,000. The property was estimated to have 8,000,000 extractable tons of ore.
In addition, also at the beginning of the year, the company finished construction on a building to be used partially in mining operations and partially in administrative purposes costing P400,000 with an estimated useful life of 15 years. A machinery to be used also in mining was bought for P800,000 with estimated useful life of 4 years and residual value of P160,000.
During 2020, the company mined 800,000 tons and sold 640,000 tons at a price of P2.20 per ton. In addition, the entity incurred direct labor costs of P320,000 and mining overhead of P64,000.
Other operating expenses excluding depreciation amounted to P288,000. Allocation of depreciation on the building is as follows: 80% on production and 20% on general and administrative purposes.
The company uses FIFO to value its inventory.
Given 2020 as the first year of operations, determine:
A. Determine Cost of goods sold in 2020?
B. Determine Maximum allowable amount that may be declared as dividends?
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