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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?

a. P430,000

b. P450,000

c. P455,000

d. P470,000

Q2. Apple Co. purchased a machine on January 1, 2019, for P180,000 cash. The machine has an estimated useful life of 4 years and a salvage value of P47,000. The company uses the double-declining-balance method of depreciation for all its assets. What will be the carrying amount of the machine as of December 31, 2020?

a. P51,000

b. P47,000

c. P45,000

d. P43,000

e. None of the choices

Q3. Mango Co. owns a machine that was bought on January 1, 2017, for P752,000. The machine was depreciated under the sum of the years' digits method using estimated useful life of 5 years and salvage value of P48,000. At the beginning of 2020, Mango Co. determined that the useful life of the machine should have been 4 years and the salvage value P70,400. For the year 2020, how much should be recognized as depreciation expense?

a. P38,400

b. P88,800

c. P118,400

d. P140,800

e. None of the choices

Q4. On January 1, 2020, Banana Co. entered into a contract to acquire a new machine for its factory. The machine, which had a cash price of P300,000, was paid for as follows: Down payment P30,000; Note payable in 10 equal monthly installments P240,000; 1,000 shares of Banana Co. ordinary shares with an agreed value of P50 per share: P50,000 Total P320,000. Prior to the machine's use, installation costs of P8,000 were incurred. The machine has an estimated useful life of 10 years and salvage value of P10,000. What should the company record as depreciation expense for the first year under the straight line method?

a. P29,800

b. P30,000

c. P31,000

d. P31,800

Reference no: EM132939396

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