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Intermediate Accounting 2 (Chapter 17 Answers)
Intermediate Accounting 2 (Chapter 17 Answers)
7. Solutions:
Requirement (a):
500,000 + 500,000 = 1,000,000 x 500/2,000= 250,000
Requirement (b):
250,000 x (300,000 oz. sold / 500,000 oz. extracted) = 150,000
8. Solution:
(10M – 3M) x 6/10 + 3M = 7,200,000 carrying amount on Jan. 1, 20x3;
(7.2M – 3M residual value) = 4.2M new depletion base x 1.5M/7.5M =
840,000
9. Solutions:
Requirement (a):
(13.2M – 400K) x [(25K x 6 months) / 1.6M] = 1,200,000
Requirement (b):
1,600,000 / (25,000 x 12mos.) = 5.33 years life of the mine
5.33 years life of the mine vs. 8-year life of equipment
1
Since the life of the mine is shorter than the life of the equipment, the
output method is used in computing depreciation.
PROBLEM 3: EXERCISE
1. Solution:
2
PROBLEM 4: CLASSROOM ACTIVITY
Solutions:
Requirement (a):
Answer: February 14, 20x1 to July 1, 20x3.
Requirement (b):
20x1 to 20x3
Site A Site B
(in (in
,000,000s) ,000,000s)
Property rights 1,000 1,200
License and legal fees 60 90
Submersible pumps 560 450
Other exploration costs 350 280
Deferred exploration costs 1,970 2,020
July 1, 20x3
3
Cash 200,000,000
Mine development costs – Site A 200,000,000
to record the income generated during the development phase as
reduction to the capitalized mine development costs
4
PROBLEM 6: MULTIPLE CHOICE - COMPUTATIONAL
1. B
Solution:
Purchase cost of mine 2,640,000
PV of restoration costs 180,000
Development costs 360,000
Residual value (300,000)
Depletion base 2,880,000
Estimated reserves 1,200,000
Depletion rate 2
Actual tons extracted 60,000
Depletion 144,000
2. C
Purchase cost of mine 7,200,000
Development costs 2,160,000
Residual value (720,000)
Depletion base 8,640,000
Estimated reserves 4,320,000
Depletion rate 2
Tons sold 480,000
Depletion in COGS 960,000
3. A
Solution:
Purchase cost of mine 1,000,000
Accumulated depletion - 1/1/x3 (100,000)
Carrying amount - 1/1/x3 900,000
Residual value (200,000)
Revised depletion base - 1/1/x3 700,000
Revised estimate of reserves a 165,000
Revised depletion rate - 20x3 4.24
4. C
Solution:
Retained earnings 600,000
Cash dividends declared (800,000)
Liquidating dividends (200,000)
5
5. B (₱9M + ₱1.5M – ₱1M) ÷ 2.5M tons = 3.8