Chapter 17 DEPLETION OF MINERAL RESOURCES

PROBLEM 2

1. C
2. C.
3. D
4. C
5. C
6. D
7.
Solution:
Purchase price of mineral rights 500,000
Exploration costs 500,000
Extraction cost during the period 2,000,000
Total cost of Natural Resources 3,000,000

Depletion rate per unit = 3,000,000 ÷ 2,000,000

= 1.50

a. Depletion charge during the period

1.50 × 500,000 = 750,000
b. Depletion recognized as expense during the period.
300,000 × 1.50 = 450,000

8. ---
9. ---

PROBLEM 5

1. B
2. A
3. A
4. D
5. C
6. A
7. A
8. C
9. D
10. A

PROBLEM 6

1. B. 144,000
Solution:
Purchase cost 2,640,000
Development costs 360,000
Estimated restoration costs 180,000
Total cost 3,180,000
Residual value ( 300,000)
Depletion base 2,880,000

Depletion rate per ton

2,880,000 ÷ 1,200,000 = 2.40
Accumulated depletion
60,000 tons × 2.40 = 144,000

2. C. 960,000
Solution:
Purchase costs 7,200,000
Development costs 2,160,000
Total costs 9,360,000
Residual value (720,000)
Depletion base 8,640,000

Depletion rate per ton

8,640,000 ÷ 4,320,000 = 2
Depletion in cost of goods sold
480,000 × 2 = 960,000

3. A. 4.24

4. C. 200,000
 Solution:
Total cash dividend declared 800,000
Less retained earnings (600,000)
Liquidating dividends 200,000

5. B. 3.80
Solution:
Land 9,000,000
Estimated restoration costs 1,500,000
Total costs 10,500,000
Residual value (1,000,000)
Depletion base 9,500,000

Depletion rate per ton

9,500,000 ÷ 2,500,000 = 3.80