Chapter 18 Problem 18-16 to 18
Problem 18-16 Answer B
Depletable cost 33,000,000
Depletion for 2007 (33,000,000 / 4,000,000 = 8.25 x 200,000) ( 1,650,000)
Balance – 1/1/2008 31,350,000
Production in 2008 225,000
New estimate – 12/31/2008 5,000,000
New estimate – 1/1/2008 5,225,000
Depletion for 2008 (31,350,000 / 5,225,000 = 6 x 225,000) 1,350,000
Problem 18-17
Question 1 – Answer A
Purchase price 14,000,000
Less: Residual value 2,000,000
Depletable cost 12,000,000
Depletion rate (12,000,000 / 1,500,000) 8.00
Depletion for 2008 (150,000 x 8) 1,200,000
Production (25,000 x 6) 150,000
Question 2 – Answer C
Production from July 1 to December 31, 2008 (25,000 x 6) 150,000 tons
Annual production (25,000 x 12) 300,000 tons
Estimated life of mine (1,500,000 / 300,000) 5 years
Since the life of the mine is shorter than the life of the equipment, the output method is used in computing depreciation.
245
Equipment 8,000,000
Less: Residual value 500,000
Depreciable cost 7,500,000
Rate per unit (7,500,000 / 1,500,000) 5.00
Depreciation for 2008 (150,000 x 5) 750,000
Problem 18-18 Answer C
Purchase price 9,000,000
Development costs in 2007 300,000
Total cost 9,300,000
Residual value 1,200,000
Depletable cost 8,100,000
Rate in 2007 (8,100,000 / 2,000,000) 4.05
Depletion for 2007 (200,000 x 4.05) 810,000
Depletable cost 8,100,000
Depletion in 2007 ( 810,000)
Balance 7,290,000
Development costs in 2008 135,000
Depletable cost in 2008 7,425,000
Rate in 2008 (7,425,000 / 1,650,000) 4.50
Depletion for 2008 (300,000 x 4.50) 1,350,000
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