In 2014, Garlian Mining Company purchased property with natural resources for P28,000,000.
The
property had a residual value of P5,000,000.
However, the entity is required to restore the property to the original condition at a discounted amount
of P2,000,000.
In 2014, the entity spent P1,000,000 in development cost.
In 2015, an amount of P1,000,000 was spent for additional development on the mine.
The tonnage mined and estimated remaining tons for years 2014-2016 are as follows:
Tons Estimated
Year Extracted Tons Remaining
2014 0 10,000,000
2015 3,000,000 7,000,000
2016 3,500,000 2,500,000
What amount should be recognized as depletion for 2016?
a. 10,150,000
b. 11,025,000
c. 15,750,000
d. 9,450,000
DEPELETION 2015
Cost of land P28,000,000
Estimated restoration cost 2,000,000
Development cost – 2014 1,000,000
Development cost – 2015 1,000,000
Total cost 32,000,000
Residual value ( 5,000,000)
Depletable amount 27,000,000
Tons extracted in 2015 3,000,000
Remaining tons – Dec 31, 2015 7,000,000
Total estimated output - Jan 1, 2015 10,000,000
Rate in 2015 (27,000,000/10,000,000) 2.70
Depletion 2015 (3,000,000 * 2.7) 8,100,000
DEPELETION 2016
Tons extracted in 2016 3,500,000
Remaining tons – Dec 31, 2016 2,500,000
Total estimated output - Jan 1, 2016 6,000,000
Original depletable amount 27,000,000
Depletion in 2015 ( 8,100,000)
Remaining depletable amount 18,900,000
New Rate in 2016 (18,900,000/6,000,000) 3.15
Depletion 2016 (3,500,000 * 3.15) 11,025,000
