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# PROBLEM NO.

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2004 Cost of land2001...................................................................... P 50,000
2002 cost to build road................................................................ 5,000,000
2002 mine improvements............................................................ 750,000
Total 20012002 cost................................................................... P5,800,000
Less: Residual value.................................................................... 600,000
Cost subject to depletion............................................................. P5,200,000
Depletion per ton:
P5,200,000/4,000,000 tons = P1.30 per ton
2004 depletion: 5,000 P1.30................................................. P 6,500 B
Building cost (2003)..................................................................... P1,500,000
Less: Salvage value..................................................................... 250,000
Cost subject to depreciation........................................................ P1,250,000
Depreciation per ton:
P1,250,000/4,000,000 tons = P0.31 per ton
2004 depreciation: 5,000 P0.31............................................ P 1,550

## 2005 Remaining 20012002 cost to be depleted:

Original cost to be depleted..................................................... P5,200,000
2004 depletion......................................................................... (6,500)
Remaining cost........................................................................ P5,193,500
2005 mine improvements........................................................ 275,000
New cost to deplete................................................................. P5,468,500
New depletion per ton:
4,000,000 tons original estimate 5,000 tons extracted
+ 3,000,000 tons discovered = 6,995,000 tons
P5,468,500/6,995,000 tons = P0.78 per ton
2005 depletion: 1,000,000 P0.78.......................................... P 780,000 C
Remaining 2003 building cost to be depreciated:
Original cost to be depreciated................................................ P1,250,000
2004 depreciation.................................................................... (1,550)
Remaining cost........................................................................ P1,248,450
2005 new building.................................................................... 225,000
New cost to depreciate............................................................ P1,473,450
New depreciation per ton:
P1,473,450/6,995,000 tons = P0.21 per ton
2005 depreciation: 1,000,000 P0.21..................................... P 210,000 D

## 2006 Remaining costbeginning of 2005............................................ P5,468,500

2005 depletion............................................................................. (780,000)
Remaining costbeginning of 2006............................................ P4,688,500
2006 mine improvements............................................................ 1,100,000
New cost to be depleted.............................................................. P5,788,500
New depletion per ton:
P5,788,500/5,995,000 tons = P0.97 per ton
2006 depletion: 2,500,000 P0.97.......................................... P2,425,000 C
2006 depreciation: 2,500,000 P0.21..................................... P 525,000 A