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

a
The revised estimate of reserves is computed as follows:

Original estimate of reserves 160,000

Understatement of total estimate 25,000
Tons extracted in 20x2 (20,000)

Remaining reserves - 1/1/x3 165,000

4. C
Solution:

Retained earnings 600,000

Cash dividends declared (800,000)

Liquidating dividends (200,000)

5. B (₱9M + ₱1.5M – ₱1M) ÷ 2.5M tons = 3.8