I.

In 2013 Shanghai Mining Company purchased property with natural

resources for 12,400,000. The property was relatively close to a large city
and had expected residual value of 3,000,000. However, 1,200,000 will
have to be spent to restore the land use.
The following information relates to the use of the property:
- In 2013, Shanghai spent 800,000 in development costs and 600,000 in
buildings on the property. Shanghai does not anticipate that the
buildings will have any utility after the natural resources are depleted.
- In 2014 and 2016, 600,000 and 1,600,000 respectively, were spent for
additional developments on the mine.
- The tonnage mined and estimated remaining tons for years 2013-2017
are as follows:
Year Tons Extracted Estimated Tons Remaining
2013 0 5,000,000
2014 1,500,000 3,500,000
2015 1,800,000 2,000,000
2016 1,700,000 900,000
2017 900,000 0
Based on the preceding information, calculate the depletion and
deprecition for:
1. 2014
Depletion Depreciation
a. 3,600,000 180,000
b. 3,240,000 420,000
c. 3,600,000 420,000
d. 3,240,000 180,000

2. 2015
Depletion Depreciation
a. 4,149,474 378,0000
b. 4,149,474 198,000
c. 3,978,000 198,000
d. 3,978,000 378,000

3. 2016
Depletion Depreciation
a. 2,891,308 153,000
b. 3,944,000 153,000
c. 2,891,308 274,615
d. 3,944,000 274,615

4. 2017
Depletion Depreciation
a. 3,944,000 153,000
b. 3,944,000 69,000
c. 2,078,000 153,000
d. 2,078,000 69,000
ANS: A,C,B,D
 II. NNN Corporation purchased land for 6,000,000. The company expected to
extract 1,000,000 tons of mine from this land over the next 20 years at
which time, residual value shall be zero. During the first 2 years of the
mines operations, 30,000 tons were mined each year and sold for 80 per
tom. The estimate of the total remaining lifetime capacity of the mine was
raised to 1,200,000 tons at the start of the third year and the residual
value was estimated to be 480,000. During the third year, 50,000 tons
were mined and sold for 85 per ton.
How much should be the depletion for the third year>
a. 215,000 b. 227,500 c. 225,000 d. 235,000
ANS: A

III. BB Company acquired a machine on January 1, 2015 at a cost of 120,000.

It was expected to have a useful economic life of 10 years. BB uses the
straight line method in depreciating its machinery and equipment and
reports on a calendar year basis. On December 31, 2017, the machine
was appraised as having a gross replacement cost of 150,000. BB applies
the revaluation model in valuing this class of property, plant and
equipment after its initial recognition.
How much should be credited to revaluation surplus on December 31,
2017?
a. 30,000 b. 105,000 c. 21,000 d.
9,000
ANS: C

IV. Sky Corporation has the following information as of January 1, 2014 on its
property, plant and equipment account:
Historical Costs Accumulated
Depreciation
Land 25,000,000 0
Building and improvements 150,000,000 50,000,000
Machinery and equipment 200,000,000 18,750,000
There were no additions or disposals during 2014. Depreciation expense is
computed on a straight line method over 20 years for buildings and
improvements and 10 years for machinery and equipment. On January 1,
2014, all of the companys property, plant and equipment were appraised
as follows:
Fair Values
Land 50,000,000
Building and improvements 225,000,000
Machinery and equipment 225,000,000
LL booked the appraisal on December 31, 2014.
How much should LL report as revaluation surplus in property, plant and
equipment under the shareholders equity?
a. 143,750,000 b. 193,750,000 c. 207,500,000
d. 318,250
ANS: B