PROBLEM 30-5

1 Cash (50,000 x 110) 5,500,000

Share Capital (50,000 x 100) 5,000,000
Share Premium 500,000
2 Wasting Asset 3,000,000
Cash 3,000,000
3 Mining Equipment 800,000
Cash 800,000
4 Cash 4,250,000
Sales (50 x 85,000) 4,250,000
5 Mining and Other Direct Cost 2,268,000
Administrative Expenses 500,000
Cash 2,768,000
6 Depletion (3,000,000 x 90/1,000) 270,000
Accumulated Depletion 270,000
7 Depreciation (800,000 x 90/1,000) 72,000
A/D - Mining Equipment 72,000
8 Inventory (5,000 x 29) 145,000
Income Summary 145,000

Mining and Other Direct Costs 2,268,000

Depletion 270,000
Depreciation 72,000
Total Production Costs 2,610,000
Cost Per Unit (2,268,000/90,000) 29

Multinational Company
Income Statement
Year Ended December 31, 2021

Sales 4,250,000
Cost of Goods Sold
Mining, labor, and Other Direct Costs 2,268,000
Depletion 270,000
Depreciation 72,000
Total Production Costs 2,610,000
Less: Inventory, Dec. 31 (145,000) (2,465,000)
Gross Profit 1,785,000
Administrative Expenses (500,000)
Net Income 1,285,000
 Multinational Company
Statement of Financial Position
December 31, 2021

Assets
Current assets:
Cash 3,182,000
Inventory 145,000 3,327,000
Noncurrent assets:
Resource property 3,000,000
Less: Accumulated depletion 270,000 2,730,000
Mining equipment 800,000
Less: Accumulated depreciation 72,000 728,000 3,458,000
Total assets 6,785,000

Equity
Share capital 5,000,000
Share premium 500,000
Retained earnings 1,285,000
Total equity 6,785,000

Retained earnings 1,285,000

Add: Accumulated depletion 270,000
Total 1,555,000
Less: Unrealized depletion in ending inventory (5,000 x 3) 15,000
Maximum dividend 1,540,000

Retained earnings 1,285,000

Capital liquidated 255,000
Dividends payable 1,540,000

PROBLEM 30-6

1. Purchase price 50,000

Road construction 5,000,000
Improvements and development costs 750,000
Total cost 5,800,000
Residual value ( 600,000)
Depletable cost 5,200,000

Depletion rate per unit (5,200,000 / 4,000,000) 1.30

Depletion for 2020 (500,000 x 1.30) 650,000

Depletable cost 5,200,000

Depletion in 2020 ( 650,000)
Remaining depletable cost 4,550,000
Development costs in 2021 1,300,000
Total depletable cost – 1/1/2021 5,850,000

Original estimated tons 4,000,000

Additional estimate 3,000,000
 Total estimated tons 7,000,000
Extracted in 2020 ( 500,000)
Remaining tons – 1/1/2021 6,500,000

New depletion rate per unit (5,850,000 / 6,500,000) .90

Depletion for 2021 (1,000,000 x .90) 900,000

2. Cost of buildings 2,000,000

Residual value ( 200,000)
Depreciable cost 1,800,000

Depreciation rate per unit (1,800,000 / 4,000,000) .45

Depreciation for 2020 (500,000 x .45) 225,000

In the absence of any statement to the contrary, the output method is used in computing depreciation of mining
equipment.

Depreciable cost 1,800,000

Depreciation for 2020 ( 225,000)
Remaining depreciable cost 1,575,000
Additional building in 2021 375,000
Total depreciable cost – 1/1/2021 1,950,000

New depreciation rate per unit (1,950,000 / 6,500,000) .30

Depreciation for 2021 (1,000,000 x .30) 300,000