Illustration: On July 1, 2020 Lethargic Company, a calendar yar entity, purchased the rights to

P2,000,000 was allocable to land. Estimated reserves were 1.5M tons. The entity expects to extra
The entity purchased new equipment on July 1, 2020. The equipment was purchased for P8M an
are removed, the equipment will ne of no use and will be sold for P500,000.

Life Equipment 8 years Depletion per unit (14,000,000-2,000,000

Life of Wasting Asset 1.5M/(25,000x12) 5 years
Depreciation per unit (8,000,000-500,000
Depletion Units of Output
Depreciation Units of Output
Depletion for 2020
# of units extracted for 2020
# of units sold for 2020
Carrying of Natural Resources as 12/31/2020

Cost 14000000
Accumulated Depletion (1200000) Depletion
Carrying Amount 12800000 Inventory

Carrying of Equipment as 12/31/2020

Depreciation
Cost 8000000 Depreciation Expense
Accumulated Depreciation (750000)
Carrying Amount 7250000

Sale
CGS
purchased the rights to a mine. The total purchase price was P14,000,000 of which
he entity expects to extract and sell 25,000 tons per month.
as purchased for P8M and had a useful life of 8 years. However, after all the resources
00.

per unit (14,000,000-2,000,000)/1.5M tons P8 per unit

on per unit (8,000,000-500,000)/1.5M tods P5 per unit

# of units extracted for 2020 (6mos x 25,000 units per month) 150000
# of units sold for 2020 (6mos x 25,000 units per month) 150000

2020 Journal Entries

1200000
Accumulated Depletion 1200000
(150,000*8)

Depreciation Expense 750000

Accumulated Depreciation 750000
(150,000*5)

1200000
Inventory 1200000
(150,000*8)