Reference no: EM132662774
Questions -
Q1. Lemery Company acquired property in 2019 which contains mineral deposit. The acquisition cost of the property was P20,000,000. Geological estimates indicate that 5,000,000 tons of mineral may be extracted. It is further estimated that the property can be sold for P5,000,000 following mineral extraction. For P2,000,000, Lemery is legally required to restore the land to a condition appropriate for resale. After acquisition, the following costs were incurred:
Exploration cost 13,000,000
Development cost related to drilling of wells 10,000,000
Development cost related to production equipment 15,000,000
The company extracted 600,000 tons of the mineral in 2019 and sold 450,000 tons. In the 2019 income statement, what amount of depletion is included in cost of sales?
Q2. Calaca Company quaries limestone, crushes it and sells it to be used in road building. Calaca paid P20,000,000 for a certain quarry on January 1, 2019. The property can be sold for P4,000,000 after production ceases. The original total estimated reserves totaled 5,000,000 tons. Calaca quarried 500,000 tons in 2019 and 1,500,000 tons in 2020. An engineering study performed in 2020 indicated that as of December 31, 2020, 4,500,000 tons were available. Calaca Company should record 2020 depletion at
Q3. On July 1, 2019 Balayan Company purchased rights to a mine. The total purchase price was P50,000,000 of which P5,000,000 was allocated to the land. Estimated reserves were 6,000,000. Balayan expects to extract and sell 100,000 tons per month. Balayan Company purchased new equipment on July 1, 2019 for P21,000,000 with estimated life of 8 years. However, after all the resource is removed, the equipment will be of no use and will be sold for P3,000,000. What is the depreciation of the equipment for 2019?
Q4. Calatagan Company provides the following balances at the end of 2019:
Wasting asset, at cost 100,000,000
Accumulated depletion 30,000,000
Capital liquidated 10,000,000
Retained earnings 15,000,000
Depletion based on 250,000 units extracted at P50 per unit 12,500,000
Inventory of resource deposit (50,000 units) 6,000,000
Calatagan can declare maximum dividend on December 31, 2019 of?