PROBLEM 1

1 Ore property 5,000,000

Cash 5,000,000
To record the acquisition of the ore property.

2 Ore property 3,000,000

Cash 3,000,000
To record costs of exploration, geological survey
and development.

3 Machinery 4,000,000
Cash 4,000,000
To record the acquisition of machinery to be used
in mining.

4 Depletion expense 1,140,000

Accumulated depletion 1,140,000
To record the depletion expense for the year for
the ore mined.

Total cost of ore property 410,000 8,000,000

Residual value - 400,000
Depletable cost 410,000 7,600,000
Total estimated output (in tons) 25,000 2,000,000
Depletion cost per ton 16 3.80
Ore mined during the year (in tons) 50,000 300,000
Depletion expense 820,000 1,140,000

5 Depreciation expense 600,000

Accumulated depreciation 600,000
To record the depreciation expense for the
machinery used in mining.

Cost of machinery 4,000,000

Total estimated output (in tons) 2,000,000
Depreciation cost per ton 2.00
Ore mined during the year (in tons) 300,000
Depletion expense 600,000
PROBLEM 2

DEPLETION

Cost 5,000,000
Estimated reserves at the beginning of the period 1,000,000
Depletion charge per ton 5.00

First Year Second Year Third Year

Depletion charge per ton 5.00 5.00 5.00
Units produced during the period 200,000 250,000 -
Total depletion for the period 1,000,000 1,250,000 -

DEPLETION - Another Approach

First Year Second Year Third Year
Cost 5,000,000 5,000,000 5,000,000
Accumulated depreciation (at the beginning of the period) - 1,000,000 2,250,000
Depletable cost (Carrying amount at the beginning of the period) 5,000,000 4,000,000 2,750,000
Estimated reserves at the beginning of the period 1,000,000 800,000 550,000
Depletion charge per ton 5.00 5.00 5.00
Units produced during the period 200,000 250,000 -
Total depletion for the period 1,000,000 1,250,000 -

DEPRECIATION
First Year Second Year Third Year*
Cost 8,000,000 8,000,000 8,000,000
Accumulated depreciation (at the beginning of the period) - 1,600,000 3,600,000
Depreciable cost (Carrying amount at the beginning of the period) 8,000,000 6,400,000 4,400,000
Estimated reserves at the beginning of the period 1,000,000 800,000 550,000
Depreciation charge per ton 8.00 8.00 8.00
Units produced during the period 200,000 250,000 -
Total depreciation for the period 1,600,000 2,000,000 550,000

*Third year
Carrying amount at the beginning of the period 4,400,000
Remaining useful life (in years) 8
Depreciation expense using the straight-line method 550,000
Fourth Year
5.00
100,000
500,000

Fourth Year
5,000,000
2,250,000
2,750,000
550,000
5.00
100,000
500,000

Fourth Year
8,000,000
4,150,000
3,850,000
550,000
7.00
100,000
700,000
PROBLEM 3

2019 2020
Cost 960,000 960,000
Additional development costs incurred - 490,000
Accumulated depletion (at the beginning of the period) - 400,000
Depletable cost (Carrying amount at the beginning of the period) 960,000 1,050,000
Estimated reserves at the beginning of the period 2,400,000
Depletion charge per ton 0.40 #DIV/0!
Units produced during the period 1,000,000 600,000
Total depletion for the period 400,000 #DIV/0!

2019 Rock and gravel property 960,000

Cash 960,000
To record the acquisition of the rock and gravel property,
including the incurrence of development costs.

Depletion expense 400,000

Accumulated depletion 400,000
To record the depletion for the year ended 2019.

2020 Rock and gravel property 490,000

Cash 490,000
To record the incurrence of development costs.

Depletion expense #DIV/0!

Accumulated depletion #DIV/0!
To record the depletion for the year ended 2020.

2021 Rock and gravel property 500,000

Cash 500,000
To record the incurrence of development costs.

Depletion expense #DIV/0!

Accumulated depletion #DIV/0!
To record the depletion for the year ended 2019.
 2021
1,450,000
500,000
#DIV/0!
#DIV/0!
2,500,000
#DIV/0!
700,000
#DIV/0!
PROBLEM 4

ERRATUM: 25,000 units should be 24,000 units (12,000 is not one-half of 25,000)

DEPLETION 2019 2020

Cost 3,960,000 3,960,000
Residual value 120,000 120,000
Accumulated depletion (at the beginning of the period) - 384,000
Depletable cost (Carrying amount at the beginning of the period) 3,840,000 3,456,000
Estimated reserves at the beginning of the period 120,000 108,000
Depletion charge per ton 32.00 32.00
Units produced during the period 12,000 24,000
Total depletion for the period 384,000 768,000

DEPRECIATION - BUILDING

Test:
Total number of units available 120,000
Annual extraction 24,000
Number of years 5

Estimated useful life of the building 8

2019 2020
Cost of building 960,000 960,000
Estimated reserves 120,000 120,000
Depreciation per ton 8.00 8.00
Units produced during the period 12,000 24,000
Annual depreciation 96,000 192,000

DEPRECIATION - EQUIPMENT

Test:
Total number of units available 120,000
Annual extraction 24,000
Number of years 5

Estimated useful life of the equipment 4

Cost of building 1,240,000

Estimated useful life of the equipment 4
Annual depreciation 310,000

2019 Resource property 3,960,000

Cash 3,960,000
To record the acquisition of the resource property.

Building 960,000
Equipment 1,240,000
Cash 2,200,000
To record the acquisition of building and equipment.
 Depletion expense 384,000
Accumulated depletion 384,000
To record the depletion for 2019.

Depreciation expense - Building 96,000

Accumulated depreciation - Building 96,000
To record the depreciation for the building in 2019.

Depreciation expense - Equipment 310,000

Accumulated depreciation - Equipment 310,000
To record the depreciation for the equipment in 2019.

2020 Depletion expense 768,000

Accumulated depletion 768,000
To record the depletion for 2020.

Depreciation expense - Building 192,000

Accumulated depreciation - Building 192,000
To record the depreciation for the building in 2020.

Depreciation expense - Equipment 310,000

Accumulated depreciation - Equipment 310,000
To record the depreciation for the equipment in 2020.
PROBLEM 5

DEPLETION
2019
Cost 5,400,000
Restoration liability 450,000
Residual value 650,000
Accumulated depletion (at the beginning of the period) -
Depletable cost (Carrying amount at the beginning of the period) 5,200,000
Estimated reserves at the beginning of the period 2,000,000
Depletion charge per ton 2.60
Units produced during the period -
Total depletion for the period -

DEPRECIATION
2019
Cost 8,000,000
Additional costs
Accumulated depreciation (at the beginning of the period) -
Depreciable cost (Carrying amount at the beginning of the period) 8,000,000
Estimated reserves at the beginning of the period 2,000,000
Depreciation charge per ton 4.00
Units produced during the period -
Total depreciation for the period -

2019 Ore property 5,400,000

Cash
To record the acquisition of the ore property.

Ore property 450,000

Restoration liability
To set-up the estimated restoration liability.

Mine improvements 8,000,000

Cash
To record the acquisition of mine improvements.

2020 Depletion expense 1,560,000

Accumulated depletion
To record the depletion for 2020.

Depreciation expense 2,400,000

Accumulated depreciation - Mine improvements
To record the depreciation for 2020.

2021 Mine improvements 770,000

Cash
To record the acquisition of additional mine improvements.

Depletion expense 640,000

 Accumulated depletion
To record the depletion for 2020.

Depreciation expense 1,120,000

Accumulated depreciation - Mine improvements
To record the depreciation for 2020.
2020 2021
5,400,000 5,400,000
450,000 450,000
650,000 650,000
- 1,560,000
5,200,000 3,640,000
2,000,000 2,275,000
2.60 1.60
600,000 400,000
1,560,000 640,000

2020 2021
8,000,000 8,000,000
770,000
- 2,400,000
8,000,000 6,370,000
2,000,000 2,275,000
4.00 2.80
600,000 400,000
2,400,000 1,120,000

5,400,000

450,000

8,000,000

1,560,000

2,400,000

770,000
 640,000

1,120,000
f
PROBLEM 6

1 Retained earnings 1,500,000

Accumulated depletion 2,500,000
Total 4,000,000
Less: Capital liquidated 1,800,000
Depletion in ending inventory (5,000 x P20) 100,000 1,900,000
Maximum dividend 2,100,000

2 Retained earnings 1,500,000

Capital liquidated 500,000
Dividends payable 2,000,000
To record the declaration of dividends.