Chapter 18 Problem 18-9
1. Cash (50,000 x 110) 5,500,000
Share capital (50,000 x 100) 5,000,000
Share premium 500,000
2. Resource property 3,000,000
Cash 3,000,000
3. Mining equipment 800,000
Cash 800,000
4. Cash (85,000 x 50) 4,250,000
Sales 4,250,000
5. Mining and other direct cost 2,268,000
Administrative expenses 500,000
Cash 2,768,000
6. Depletion 270,000
Accumulated depletion (3,000,000 / 1,000,000 x 90,000) 270,000
7. Depreciation (90,000 x .80) 72,000
Accumulated depreciation - mining equipment 72,000
Depreciation rate (800,000 / 1,000,000) = .80
8. Inventory, December 31 (5,000 x 29) 145,000
Profit and loss 145,000
Mining labor and other direct costs 2,268,000
Depletion 270,000
Depreciation 72,000
Total production costs incurred 2,610,000
Divide by number of units extracted 90,000
Unit cost 29
Multinational Company
Income Statement
Year ended December 31, 2008
Sales 4,250,000
Cost of sales
Mining labor and other direct costs 2,268,000
Depletion 270,000
Depreciation 72,000
Total production cost 2,610,000
Less: Inventory, December 31 145,000 2,465,000
Gross income 1,785,000
Administrative expenses 500,000
Net income 1,285,000
Multinational Company
Statement of Financial Position
December 31, 2008
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
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