On January 2, 2020, the Wally Company purchased land for P 450,000, from which it is estimated that 400,000 tons of ore could be extracted. It estimates that it will cost P 80,000 to restore the land, after which it could be sold for P 30,000. During 2020, the company mined 80,000 tons and sold 50,000 tons. During 2021, the company mined 100,000 tons and sold 120,000. At the beginning of 2022, the company spent additional P 100,000, which increased the reserves by 60,000 tons. In 2022, the company mined 140,000tons and sold 130,000 tons. The company uses a FIFO cost flow assumption. Required: a. Calculate the depletion included in the income statement and ending inventory for 2020, 2021 and 2022.
On January 2, 2020, the Wally Company purchased land for P 450,000, from which it is estimated that 400,000 tons of ore could be extracted. It estimates that it will cost P 80,000 to restore the land, after which it could be sold for P 30,000. During 2020, the company mined 80,000 tons and sold 50,000 tons. During 2021, the company mined 100,000 tons and sold 120,000. At the beginning of 2022, the company spent additional P 100,000, which increased the reserves by 60,000 tons. In 2022, the company mined 140,000tons and sold 130,000 tons. The company uses a FIFO cost flow assumption. Required: a. Calculate the depletion included in the income statement and ending inventory for 2020, 2021 and 2022.
Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion
Section: Chapter Questions
Problem 29CE
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On January 2, 2020, the Wally Company purchased land for P 450,000, from which it is
estimated that 400,000 tons of ore could be extracted. It estimates that it will cost P 80,000
to restore the land, after which it could be sold for P 30,000. During 2020, the company mined 80,000 tons and sold 50,000 tons. During 2021, the company mined 100,000 tons
and sold 120,000. At the beginning of 2022, the company spent additional P 100,000,
which increased the reserves by 60,000 tons. In 2022, the company mined 140,000tons
and sold 130,000 tons. The company uses a FIFO cost flow assumption.
Required:
a. Calculate the depletion included in the income statement and ending inventory for 2020,
2021 and 2022.
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