PACIFIC SOUTHBAY COLLEGE, INC.
Purok Carmenville, Calumpang, General Santos City
Acctg 24
Name: Louie Jay J. Bialan_BSA 2
MODULE 4 DEPLETION
Problem 32-1 (IAA)
Resource Company
Answer:
2019
2020
Rock and gravel property
Cash
P 960,000
Depletion (P1,000,000x.40)
Accumulated Depletion
P 400,000
Rock and gravel property
Cash
P 490,000
Depletion (P 600,000x.75)
Accumulated Depletion
P 450,000
P 960,000
P 400,000
P 490,000
P 450,000
Total cost (P 960,000+490,000)
Less: Accumulated Depletion
Depletable Amount
Divided by Estimated remaining output
(P 2,400,000-1,000,000)
Revised depletion rate per ton
2021
P 1,450,000
400,000
P 1,050,000
1,400,000
.75
Rock and gravel property
Cash
P 500,000
Depletion (P 700,000x.44)
Accumulated Depletion
P 308,000
Total cost
Add: Additional development cost
Total
P 500,000
P 308,000
P 1,450,000
500,000
P 1,950,000
Less: Accumulated Depletion (P 400,000+450,000)
Remaining depletion amount
Divide by new estimated remaining output
New depletion rate
850,000
P 1, 100,000
2, 500,000
.44
Problem 32-2 (IAA)
Reliable Company
Answer:
2019
Resource property
Cash
P 3,960,000
Building
Equipment
Cash
P 960,000
1,240,000
Depletion (P 12,000x32)
Accumulated Depletion
P 384,000
P 3,960,000
P 2,200,000
P 384,000
Cost of resource property
Less: Residual value
Depletable amount
Divided by estimated output
Depletion rate per unit
Depreciation (P 12,000x8)
Accumulated Depreciation
P 3,960,000
120,000
P 3,840,000
120,000
32
P 96,000
P 96,000
Depreciation rate per unit = P 960,000/ 120,000= 8
The output method is used in computing the depreciation of the building
because the life resource property (5 years or P120,000/24,000) is shorter
than the life of the building ( 8 years).
Depreciation
Accumulated Depreciation
(P 1,240,000/4 years= 310,000)
P 310,000
P 310,000
The straight line method is used for the heavy equipment because the life
of 4 years is shorter than the life of the resource property of 5 years.
2020
Depletion
Accumulated Depletion (P 25,000x32)
P 800,000
Depreciation ( P 25,000x8)
Accumulated Depreciation -building
P 200,000
Depreciation
Accumulated Depreciation-Equipment
P 310,000
P 800,000
P 200,000
P 310,000