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How much should be recognized as depletion

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Q1) On January 1, 2018, Nickel Co. purchased a land for P12,000,000. The company expected to extract 2,000,000 tons of mine from this land over the next 20 years at which time, the residual value of the asset shall be zero. During 2018 and 2019 operations, 60,000 tons were mined each year and sold for P80 per ton. The estimate of the remaining lifetime capacity of the mine was raised to 2,400,000 tons at the start of 2020 and the residual value was to be P960,000. How much should be recognized as depletion in 2020 if the total production for 2020 is 100,000 tons?

-P430,000

-P450,000

-P455,000

-P470,000

Q2) SMR Coal Mining acquires a property at a cost of P10,000,000. Intangible development costs amounted to P2,400,000. After extraction has occurred, SMR Coal Mining must restore the property (estimated present value of the obligation is P1,200,000), after which it can be sold for P3,400,000. The company estimates that 100,000 tons of coal can be extracted. If 18,000 tons were extracted during the first year, which of the following would be included in the entry to record the depletion?

-Debit to accumulated depletion for P1,836,000.

-Debit to inventory for P1,836,000.

-Credit to inventory for P1,800,000.

-Credit to accumulated depletion for P3,060,000

Reference no: EM132934991

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