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MINERS CO. has acquired a track of mineral land for P27,000,000. Miners estimates that the acquired property will yield 120,000 tons of ore with sufficient

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MINERS CO. has acquired a track of mineral land for P27,000,000. Miners estimates that the acquired property will yield 120,000 tons of ore with sufficient mineral content to make mining and processing profitable. It further estimates that 6,000 tons of ore will be mined the first and last year and 12,000 tons every year in between. (Assume 11 years of mining operations.) The land will have a residual value of P900,000. Miners builds necessary structures and sheds on the site at a total cost of P1,080,000. The company estimates that these structures can be used for 15 years but, because they must be dismantled if they are to be moved, they have no residual value. Miners does not intend to use the buildings elsewhere. Mining machinery installed at the mine was purchased secondhand at a total cost of P1,800,000. The machinery cost the former owner P4,500,000 and was 50% depreciated when purchased. Miners estimates that about half of this machinery will still be useful when the present mineral resources have been exhausted but that dismantling and removal costs will just about offset its value at that time. The company does not intend to use the machinery elsewhere. The remaining machinery will last until about one-half the present estimated mineral ore has been removed and will then be worthless. Cost is to be allocated equally between these two classes of machinery. Required: Prepare an audit working paper showing computations for (a) estimated depletion and depreciation charges for the first year, (b) estimated depletion and depreciation charges for the 5th year, (c) estimated depletion and depreciation charges for the 6th year, (d) estimated depletion and depreciation charges for the 11th year and (e) the depletion and depreciation charges for the first year assuming actual production of 5,000 tons of mineral ore

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