In January 20X1, ABC Mining Corporation purchased a mineral mine for P7,200,000 with removable ore

estimated by geological surveys at 4,320,000 tons. The property has an estimated value of P720,000
after the ore has been extracted. ABC incurred P2,160,000 of development costs preparing the property
for the extraction of ore. During 20X1, 540,000 tons were removed and 480,000 tons were sold. For the
year ended December 31, 20X1, ABC should include what amount of depletion chargeable to ore
inventory?

In January 20X1, ABC Mining Corporation purchased a mineral mine for P7,200,000 with removable ore
estimated by geological surveys at 4,320,000 tons. The property has an estimated value of P720,000
after the ore has been extracted. ABC incurred P2,160,000 of development costs preparing the property
for the extraction of ore. During 20X1, 540,000 tons were removed and 480,000 tons were sold. For the
year ended December 31, 20X1, ABC should include what amount of depletion in its cost of goods sold?

960,000

In 20X4, ABC Mining Inc. purchased land for P5,600,000 that had a natural resource supply estimated at
4,000,000 tons. When the natural resources are removed, the land has an estimated value of P640,000.
The required restoration cost for the property is estimated to be P800,000. Development and road
construction costs on the land were P560,000, and a building was constructed at a cost of P88,000 with
an estimated P8,000 salvage value when all the natural resources have been extracted. During 20X5,
additional development costs of P272,000 were incurred, but additional resources were not discovered.
Production for 20X4 and 20X5 was 700,000 tons and 900,000 tons, respectively. Round depletion rate to
2 decimal places. Depletion for 20X5 is

On an audit engagement for 20X0, you handled the audit of fixed assets of ABC Copper Mines. This
mining company bought the exploration rights of XYZ Exploration on June 30, 20X0 for P7,290,000. Of
this purchase price, P4,860,000 was allocated to copper ore which had remaining reserves estimated at
1,620,000 tons. ABC Copper Mines expects to extract 15,000 tons of ore a month with an estimated
selling price of P50 per ton. Production started immediately after some new machines costing P600,000
was bought on June 30, 20X0. These new machineries had an estimated useful life of 15 years with a
scrap value of 10% of cost after the ore estimated has been extracted from the property, at which time
the machineries will already be useless. Among the operating expenses of ABC Copper Mines at
December 31, 20X0 were: Depletion expense - 405,000 and depreciation of machineries - 40,000. Round
depletion rate to 2 decimal places. The adjusted depletion at year-end amounted to:

ABC Corporation purchased land for P6, 000, 000. The company expected to extract 1 million tons of
mine from this land over the next 20 years at which time, residual value shall be zero. During the first 2
years of the mine’s operations, 30, 000 tons were mined each year and sold for P80 per ton. The
estimate of the total lifetime capacity of the mine was raised to 1, 200, 000 tons at the start of the third
year and the residual value was estimated to be P480, 000. During the third year, 50, 000 tons were
mined and sold for P85 per ton. How much would be the depletion expense for the third year?

In 20X4, ABC Mining Inc. purchased land for P5,600,000 that had a natural resource supply estimated at
4,000,000 tons. When the natural resources are removed, the land has an estimated value of P640,000.
The required restoration cost for the property is estimated to be P800,000. Development and road
construction costs on the land were P560,000, and a building was constructed at a cost of P88,000 with
an estimated P8,000 salvage value when all the natural resources have been extracted. During 20X5,
additional development costs of P272,000 were incurred, but additional resources were not discovered.
Production for 20X4 and 20X5 was 700,000 tons and 900,000 tons, respectively. Round depletion charge
to the nearest cent. On 20X4, depletion charge is

ABC Company has the following information pertaining to its mining operations:
Estimated cost of restoring property after mining is completed - P400, 000
Number of tons mined during the current year - 50, 000 tons
Cost of land - P6,000,000
Estimated number of tons ore to be mined - 400, 000 tons
Sales value of land after mining - P300, 000
Development costs incurred - P500, 000
Number of tons sold during the current year - 35, 000 tons
Cost of production (excluding depletion) - P7.00
The company already recognized the estimated restoration cost immediately after the resource property
was acquired. How much would be the company’s cost of goods sold?

In connection with your audit of the ABC Mall Corporation for the year ended December 31, 20X1, you
noted that the company purchased for P16,640,000 mining property estimated to contain 12,800,000
tons of ore. The residual value of the property is P1,280,000. Building used in mine operations costs
P1,280,000 have estimated life of fifteen years with no residual value. Mine machinery costs P2,560,000
with an estimated residual value P512,000 after its physical life of 4 years. Following is the summary of
the company’s operations for first year of operations.
Tons mined - 1,280,000 tons
Tons sold - 1,024,000 tons
Unit selling price per ton - P4.40
Direct labor - 1,024,000
Miscellaneous mining overhead - 204,800
Operating expenses (excluding depreciation) - 921,600
Inventories are valued on a first-in, first-out basis. Depreciation on the building is to be allocated as
follows: 20% to operating expenses, 80% to production. Depreciation on machinery is chargeable to
production. How much is the cost of sales for the year ended December 31, 20X1?

ABC Company acquired a tract of land containing an extractable natural resource. ABC is required by the
purchase contract to restore the land to a condition suitable for recreational use after it has extracted
the natural resource. Geological surveys estimate that the recoverable reserves will be 2,500,000 tons
and that the land will have a value of P1,000,000 after restoration. Relevant cost information follows:
Land .- P9,000,000 and Estimated restoration costs - 1,500,000. What should be the depletion charge
per ton of extracted material? 3.80

ABC Company purchased a tract of resource land in 20X0 for 39, 600, 000. The content of the tract was
estimated at 1, 200, 000 units. When the resource has been exhausted, it is estimated that the land will
be worth 1, 200, 000. Fixed installations were set up at a cost of 9, 600, 000. Mining equipment was
purchased on January 1, 20X1 for 12, 400, 000. The life of the fixed installations is 8 years and the
equipment, 4 years. In 20X1, 120, 000 units have been extracted. This was one-half of the annual
extraction, which can be expected following the first year of operations. ABC Company should record
depreciation for 20X1 at

In connection with your audit of the ABC Mall Corporation for the year ended December 31, 20X1, you
noted that the company purchased for P16,640,000 mining property estimated to contain 12,800,000
tons of ore. The residual value of the property is P1,280,000. Building used in mine operations costs
P1,280,000 have estimated life of fifteen years with no residual value. Mine machinery costs P2,560,000
with an estimated residual value P512,000 after its physical life of 4 years. Following is the summary of
the company’s operations for first year of operations.
Tons mined - 1,280,000 tons
Tons sold - 1,024,000 tons
Unit selling price per ton - P4.40
Direct labor - 1,024,000
Miscellaneous mining overhead - 204,800
Operating expenses (excluding depreciation) - 921,600
Inventories are valued on a first-in, first-out basis. Depreciation on the building is to be allocated as
follows: 20% to operating expenses, 80% to production. Depreciation on machinery is chargeable to
production. How much is the Inventory of December 31, 20X1?

XYZ Company quarries limestone, crushes it and sells it to be used in road building. XYZ paid
P10,000,000 for a certain quarry. The property can be sold for P3,000,000 after production ceases.
Estimated reserves 10,000,000; Tons quarried through December 31, 20X4 4,000,000; Tons quarried in
20X5 1,500,000. An engineering study performed in 20X5 indicated that as of January 1, 20X5, 7,500,000
tons of limestones were available. 30. Assume that the materials and labor cost incurred during 20X5 is
2,160,000, and that 1,000,000 tons were sold during the year at P5.00, Gross Profit for the year is

BC Company purchased a tract of resource land in 20X0 for 39, 600, 000. The content of the tract was
estimated at 1, 200, 000 units. When the resource has been exhausted, it is estimated that the land will
be worth 1, 200, 000. Fixed installations were set up at a cost of 9, 600, 000. Mining equipment was
purchased on January 1, 20X1 for 12, 400, 000. The life of the fixed installations is 8 years and the
equipment, 4 years. In 20X1, 120, 000 units have been extracted. This was one-half of the annual
extraction, which can be expected following the first year of operations. ABC Company should record
depletion for 20X1 at

On an audit engagement for 20X0, you handled the audit of fixed assets of ABC Copper Mines. This
mining company bought the exploration rights of XYZ Exploration on June 30, 20X0 for P7,290,000. Of
this purchase price, P4,860,000 was allocated to copper ore which had remaining reserves estimated at
1,620,000 tons. ABC Copper Mines expects to extract 15,000 tons of ore a month with an estimated
selling price of P50 per ton. Production started immediately after some new machines costing P600,000
was bought on June 30, 20X0. These new machineries had an estimated useful life of 15 years with a
scrap value of 10% of cost after the ore estimated has been extracted from the property, at which time
the machineries will already be useless. Among the operating expenses of ABC Copper Mines at
December 31, 20X0 were: Depletion expense - 405,000 and depreciation of machineries - 40,000. Round
depreciation rate to 2 decimal places. The adjusted depreciation at year-end amounted to :