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How much the company should record depletion

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Question - June Company acquired property in early 2006 which is believed to include valuable mineral deposit. The cost of the property was P9,000,000. Geological estimates indicate that approximately 1,000,000 tons of mineral may be economically extracted. It is further estimated that the property can be sold for P2,500,000 to be used for commercial development following mineral extraction. For P800,000, June expects to restore the land to a condition appropriate for resale. After initial acquisition, the following costs were incurred:

Exploration cost 3,500,000

Development cost related to drilling and development of wells 3,200,000

Development cost related to production equipment 4,600,000

The company extracted 50,000 tons of the mineral in 2006.

Required - How much the company should record 2006 depletion?

Reference no: EM132675722

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