Question
June Company acquired property in early 2006 which is believed to include valuable mineral deposit. The cost of the property was P9,000,000. Geological estimates indicate
June Company acquired property in early 2006 which is believed to include valuable mineral deposit. The cost of the property was P9,000,000. Geological estimates indicate that approximately 1,000,000 tons of mineral may be economically extracted. It is further estimated that the property can be sold for P2,500,000 to be used for commercial development following mineral extraction. For P800,000, June expects to restore the land to a condition appropriate for resale. After initial acquisition, the following costs were incurred:
Exploration cost
3,500,000
Development cost related to drilling and development of wells
3,200,000
Development cost related to production equipment
4,600,000
The company extracted 50,000 tons of the mineral in 2006.
The company should record 2006 depletion at
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started