Problem 4 Illusion Company purchased a tract of resource land in 2019 for P3,960,000. The content of the tract was estimated at 120,000 units. When the resource has been exhausted, it is estimated that the land will be worth P120,000. Building was set up at a cost of P960,000 and heavy equipment was purchased in early January 2019 for P1,240,000. The useful life of the building is 8 years and the useful life of the equipment is 4 years. In 2019, 12,000 units have been extracted. This was one half of the annual extraction which can be expected following the first year of operations. In 2020, 25,000 units were expected. Required: Prepare journal entries to record the transactions relating to the resource property for 2019 and 2020

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Problem 4
Illusion Company purchased a tract of resource land in 2019 for P3,960,000. The content of the tract was estimated at
120,000 units. When the resource has been exhausted, it is estimated that the land will be worth P120,000.
Building was set up at a cost of P960,000 and heavy equipment was purchased in early January 2019 for P1,240,000. The
useful life of the building is 8 years and the useful life of the equipment is 4 years.
In 2019, 12,000 units have been extracted. This was one half of the annual extraction which can be expected following the
first year of operations. In 2020, 25,000 units were expected.
Required:
Prepare journal entries to record the transactions relating to the resource property for 2019 and 2020

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 4 images

Blurred answer
Knowledge Booster
Depletions and Amortizations
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education