‘ACC 107 Intermediate Accounting 2 Br unacn eo Module #10 cd Class number: ame _kaorl Begonia __ ee nehor = eps — — Materials: SAS, Calculstor | Lesson Title: Depletion of Mineral Resources Lesson Objectives: At the end of this module, | should be able to: 1 State the initial anc subsequent measurement and evaluation assets 2. Account for the costs of wasting assets References: Theory of Accounts Vol. One by Conrado T. Valix Applied Auditing by Asuncion, Naina and Escala hitips:/[Link]/bigg est-mining-companies-5077594 of exploratio i ; th t with some friends Productivity Tip: If you thin’: virtual study groups will help your productivity, try to connect C gd form euch a group, E ren f you dont get as much out of it academically, it may be beneficial for your mental health while you're studying at home. - A, LESSON PREVIEWIRI VIEW 4) Introduction (2 mins) are Hello there! | hope that you are enjoying this subject so far. We'll move to more fun lesson in this subject. Are you ready? ‘i Please read the !earning objectives before you proceed to the succeeding activities. The learning objectives are your goals for today. Remember, you need to achieve these at the end of the lesson. Let me share with you some concept that is related to our new lesson. “The mining industry is comprised of companies that explore and mine for precious and nonprecious metals and minerals, as well as energy commodities like coal and petroleum; They are used in the manufacturing of a broad range of industrial products, capital goods, and consumer items including machines, computers, clothing, buildings, and automobiles. Some companies in the mining sector even produce agricultural commodities : 2) Activity 1: What | Know Chart, Part 4 (3 mins) ‘Try answering the questions below by writing your ideas-under the column “What I Know”, Writing keywords or phrases that you think are related to the question will do, oes “ein ‘Quéstions; ace Cgpenitvres “barred wy SRG WGwethint What are exploration and = exgIBRSTO ook cMolution of Miareh ese’) eval ae ree ai WL erie! fat eommereXer elt | VaR ASSERT Sumplirh . Laker Goat + lest incom 2 What isthe intial measurement | caine oxcigiP0F exploration and evaluation “yp vlok! Xa rele ea. sort anew = eancanconanininntanbab ores SR armediate Accounting 2 ened AGC 107 Int mediate Aero ste B10 Sat Class number _ Section ‘Schedule: - Date: ase ats? T ~ Urdliy Cask ode ge 3 Vat is the subsequent Wile, Cock mor om measurement of exploration and ; lumu~ Peyalvesin Your | eve uation assets?” | Dinter Feyatunton qnosl « B, MAIN LESSON 1) Activity 2: Content Notes (13 mins) LO1: State the initial and subseq sent measurement of exploration and evaluation assets Exploration and evaluation assets are expenditures incurred by an entity «n connection with exploration and evaluation of mineral resources before technical and commercial viability. Exploration for and evaluation of mineral resources is the search for mineral resources, including minerals, oil, natural gas and similar non-regenerative resources alter the entity has obtained legal rights to explose in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resource. i uu i ‘MINING VALUE CHAIN | cae | Accounting for exploration ar evaluation expenditures * > PFRS 6 permits entiies to develop their, own accounting policy for exploratio i assets which results in elevant and reliable information based entirely on managonectoe judgment and-without the need:to:consider the hierarchy of standards in PAS & ‘This document is the property of PHINMA EDUCATION. 2Name:, = Section ~ Schedule AGC 107 Int mediate Accounting 2 Module #10 Not: - \ Tan sible equioment cost are identified as either | Movable — depreciated over its own useful life Immovable - depreciated over its ow) useful Ife or the life of the wasting asset, whichever is shorter The efore, ¥ Own useful life < Useful life of Wasting assets, use straight | ‘ine method or other stated method Y Own useful life > Useful fe of Wasting assets, use output method 4. Estimated Restoration cost This is the cost that may be necessary to bring the property to its original state. This is only capitalized to the extent that it is recognized as a provision. This is measured at present value of the fulure cash flows to be incurred to restore the property. 2) Activity 3: Skill-building Activities (20 mins) Part I. Choose the best answer. B _4.€xploration and evalu: ‘Write the letter of your answer on the blank space provided. lation expenditures are incurred ‘A. When searching for an area that may warrant detailed exploration even though the entity has not yet obtained the legal right to explore a specific area B. When the legal rights to explore a specific area have been obtained but the technical feasibility and cominercial viability of extracting a mineral resource are not yet demonstrable 2 made \Wheh’ specific are is being developed and preparations for commercial extraction are being D. In-extracting mineral resource and processing the resource to make it marketable or transportable C_2.When an entity required to recognize exploration and evaluation expenditure as an asset? When required by the e asset oO 9 9 D> [Link] of the following evaluation? When such expenditure is is recoverable in future periods When the'technical feasibility ard commercial viability of extracting the associated mineral resource have been demonstrated ity's accounting policy for recognizing exploration and evaluation ‘Such expenditure is always expensed as incurred experiditures would never qualify as an exploration and This documents the property of of PHINMA EDUCATION.Ga nian cou AON ACC 107 Intermadiate Accounting 2 Name: Class number: Section ~~ she Date Expenditure for acquisition of rights to explore Expenditure for exploratory drilling Penile relatert to the develupment of minera resources Expenditure for aciwitis in relation to evaluating tne technical feasibilly and commercial viabilty extracting a mineral resource voor —{_+ Which measurement model applies to exploration and evaluation asset subsequent to initial recognition? ‘A. The cost model B. The revaluation model C. Either the cost model or the revaluation model D. The recoverable amount model ? t_5.Whici. .ype of expenditure is included in exploration and evaluation of mineral resources? - A. The extract on and processing of mineral resource for transport B. The comme rcial review of possible areas for mineral extraction before bidding for the legal right to expire a specific area C. The expenc ture incurred after the technical feasibility and commercial vial mineral resource are demonstrable D. None of these should be included in exploration and evaluation expenditures. extracting a Part Il Solve for the following problems. 4. In 20x1, BUCCLIC RURAL Co. acquired land for a total cost of P40,000,000 to be used to quarry marble, limestone, and construction aggregates. Costs incurred to-obtain legal right to explore the property amounted to P8,000,000. Expenditures incurred in the exploration for and evaluation of mineral resources before technical feasibility and, commercial viability of extracting a mineral resource are demonstrable totalled P12,000;000. Intangible development costs of drilling, tunnels, shafts, and wells before the actual production totalled: P 20,000,000. BUCOLIC Co: estimates that total recoverable reserves are 100,000,000 units. Furthermore, BUCOLIC Co. expects to sell the land for P4,800,000 after resource is depicted, However, no. buyer will pay this price unless the mine is drained, filed and levelled, a process that will cost P800,000. Its BUCOLIC's policy to capitalize all exploration costs. “ . ‘Actual units quarried in 20x through 20x4 totalled 30,000,000 units. On January 1, 20x5, BUCOLIC Co. estimated that the remaining recoverable reserves are only 25,000,000 [Link] after the reserves are exhausted, the land will be sold for P3,200,000. Costs of disposal are estimated at P1,200,000. Actual units quarried in 20xS totalled 6,000,000 units. How much is the. total cost of the natural resource? Fae at POI ay ish} ge Erploration cast Lineal paseo Tokal cash of DatnreA. sesnuTEs, This document is the property of PHINMA EDUCATION,ACC 107 Int rmediate Accounting 2 Module #10 Name: __ - sass number Section: ‘Schedule. = 5s eanenerene 2. In 20x1, OBSTREPEROUS NOI 3Y Mining Corp. acquired the right to use 1,000 acres of land to e for gold. The lease cost is P2 0,000,000, and the related exploration costs on the property amounted to P40,000,000. It is the policy of OBSTREPEROUS Mining Corp. to capitalize all costs of exploration and evaluation of mi ieral resources. Intangible development costs of drilling, tunnels, shafts, and wells incurred oefore opening the rnine amounted to P340,00,000. At the end of the mine's economic useful life, SBSTREPEROUS Mining Corp. is required by legislation to restore the site. Estimated restoration costs have a fair value of P20,000,000 OBSTREPEROUS. ing Corp. estimates that the mie will provide approximately 100,000,000 ounces of gold Actual ounce of gold mined in 20x2 totalled 300,000 ounces. How much is the total cost of the natural resources? Tease Gast TBS OIG 1 Explorano Gest 4peoo e . Antangble develep war cost 340000 ed Eekmnond resection case 20 ove Or? “i 5 3. During 2016, ABC Company acquired property with mineral deposit for P15,000,000. The ) property has-a residual value of P500,000. However, ABC is legally required to restore the property to its original condition at a discounted amount of P2,000,000. Geologists estimate that 2,000,000 tons are to be extracted. Tons extracted totalled 250,000 in 2016. How much is the total cost of the natural resource? Atquishion cast Io on ovo Eh mated oth 2000 OVO vod patel cok OF nedyrel reso oe 3) Activity 4: What | Know CHlart, Part 2 (2 mins) ; : 7 ae fo vanawer the questions in the "What | Know Chart” in Activity 1. Log in your answer in the “What | Learned” column. Let's go! Activity 5: Check for Understanding (5 mins) | innat France vill be PERS 6 Exploration for and Evaluation of Mineral Resources inapplicable? fn evtity does not apply PFES G 4o expendibirs a comes: Deore tee eapleration For aha evelvation op mingcl reseuree, such 8S expenditures never Seporl He |ptihy has eb foind fu eget cents te explore & Specipin. aren D Apr fre fechnieal: Feasiviliby and commercial violoilty oF extracting As wminwcl NOVEL are demonstrable -GB pronMa FD ACC 107 Intermediate Accounting 2 ° Se aa Module #10 we n Class number: Date: 5) Activity 6 Thinking about Learning (5 mins) Wow. congratulations! You are dene wilt this session. Ste ting today, we will keep track of your progress. Shade the module number you just completed. 7 F3 Tues Leas] ela ba T2 Le B12 13 [24 Gs 126 id you have challenges learning the concepls in this modi le? If none, which parts of the module helped you learn the concepts? . None) yeasyrenik ey forehand eyibint tor assets: ‘Some question/s | want to ask my teacher about thls module is/are: _ 7 Pos ASSIGNMENT: Read the chapter wil 1 the topic Depletion of Mineral Resources in your book. FAQs + Onthe balance sheet, we classify natural resources as a Separate group among noncurrent assels under headings such as "Timber stands” and “Oil reserves” 3 Natural resources reprasent inventories of raw materials that can be consumed (exhausted) through extraction or removal from their natural setting (¢.9. removing oll from the ground), KEY TO CORRECTICNS Activity 3: Skill-building Activities Part! Rene goo0m Part Il 1. Acquisition cost 40,000,000 Legal right 8,000,000 Exploration costs 12,000,000 Intangible development costs 20,000,000 : Total cost of natural resource 80,000,000 2 : Lease cost 00,000,000 ae 1 Exploration cost 40,000,000 ok 3 Intangible development costs 340,000,000 ‘This document is the property of PHINMA EDUCATION.