In connection with your audit of the Ponce Mining Corporation for the year ended

December 31, 2006, 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 and 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 921,600
depreciation)

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.

QUESTIONS:

Based on the above and the result of your audit, answer the following: (Disregard
tax implications)

1. How much is the depletion for 2006?

a. P1,228,800 b. P1,536,000 c. P307,200 d.
P1,664,000

2. Total inventoriable depreciation for 2006?

a. P640,000 b. P580,267 c. P614,400 d. P0

3. How much is the Inventory as of December 31, 2006?

a. P701,440 b. P675,840 c. P680,960 d.
P669,013
4. How much is the cost of sales for the year ended December 31, 2006?
a. P2,703,360 b. P2,805,760 c. P2,723,840 d. P2,676,053

5. How much is the maximum amount that may be declared as dividends at the
end of the company’s first year of operations?
a. P2,391,040 b. P2,063,360 c. P2,083,840 d. P2,111,147