Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 45 views

    Exploration Assets and Depletion: Theory

    Uploaded by

    Noorodden
    The document discusses accounting standards for exploration and evaluation assets under PFRS 6. Some key points include: 1) PFRS 6 applies to expenditures incurred during exploration and evaluation activities prior to demonstrating technical feasibility and commercial viability of extracting mineral resources. 2) Expenditures related to development of mineral resources would not qualify as exploration and evaluation assets. 3) PFRS 6 requires entities to recognize exploration and evaluation expenditures as assets to the extent they are recoverable in future periods.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Exploration Assets and Depletion: Theory

    Uploaded by

    Noorodden
    45 views2 pages
    The document discusses accounting standards for exploration and evaluation assets under PFRS 6. Some key points include: 1) PFRS 6 applies to expenditures incurred during exploration and evaluation activities prior to demonstrating technical feasibility and commercial viability of extracting mineral resources. 2) Expenditures related to development of mineral resources would not qualify as exploration and evaluation assets. 3) PFRS 6 requires entities to recognize exploration and evaluation expenditures as assets to the extent they are recoverable in future periods.

    Original Description:

    CCCCC

    Original Title

    FAR Handouts

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses accounting standards for exploration and evaluation assets under PFRS 6. Some key points include: 1) PFRS 6 applies to expenditures incurred during exploration and evaluation activities prior to demonstrating technical feasibility and commercial viability of extracting mineral resources. 2) Expenditures related to development of mineral resources would not qualify as exploration and evaluation assets. 3) PFRS 6 requires entities to recognize exploration and evaluation expenditures as assets to the extent they are recoverable in future periods.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    45 views2 pages

    Exploration Assets and Depletion: Theory

    Uploaded by

    Noorodden
    The document discusses accounting standards for exploration and evaluation assets under PFRS 6. Some key points include: 1) PFRS 6 applies to expenditures incurred during exploration and evaluation activities prior to demonstrating technical feasibility and commercial viability of extracting mineral resources. 2) Expenditures related to development of mineral resources would not qualify as exploration and evaluation assets. 3) PFRS 6 requires entities to recognize exploration and evaluation expenditures as assets to the extent they are recoverable in future periods.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    EXPLORATION ASSETS AND DEPLETION

    THEORY

    1. PFRS 6 applies to expenditures incurred


    a. When a specific area is being developed and preparations for commercial extraction are
    being made
    b. In extracting mineral resources and processing the resource to make it marketable or
    transportable
    c. When searching for an area that may want detailed exploration, even though the entity
    has not yet obtained the legal rights to explore a specific area
    d. When the legal rights to explore a specific area have been obtained, but the technical
    feasibility and commercial viability of extracting a mineral resource are not yet
    demonstrated

    2. Which of the following expenditures would never qualify as an exploration and evaluation asset?
    a. Expenditure for exploratory drilling
    b. Expenditure for acquisition of rights to explore
    c. Expenditures related to the development of mineral resources
    d. Expenditures for activities in relation to evaluating the technical feasibility and
    commercial viability of extracting mineral resources

    3. Does PFRS 6 require an entity to recognize exploration and evaluation expenditures as assets?
    a. No, such expenditure is always expensed in profit or loss incurred
    b. Yes, but only to the extent such expenditure is recoverable in future periods
    c. Yes, but only to the extent required by the entity’s accounting policy for recognizing
    exploration and evaluation of assets
    d. Yes, but only to the extent the technical feasibility and commercial viability of extracting
    the associated mineral resources have been demonstrated

    4. An entity is required to consider which of the following in developing accounting policy for
    exploration and evaluation activities?
    a. Recent pronouncements of standard-setting bodies
    b. Whether the accounting policy results in information that is relevant and reliable
    c. The requirements and guidance in PFRS dealing with similar and related issues
    d. The definitions, recognition criteria, and measurement concepts or assets, liabilities,
    income and expenses in the Conceptual Framework

    5. Which measurement model applies to exploration and evaluation assets subsequent to initial
    recognition?
    a. The cost model
    b. The revaluation model
    c. The recoverable amount model
    d. Either the cost model or the revaluation model

    6. Which of the following is not a disclosure requirement by PFRS 6?


    a. Information about commercial reserve quantities
    b. Accounting policies for exploration and evaluation expenditures including the
    recognition of exploration and evaluation assets
    c. Information that identifies and explains the amounts recognized in the financial
    statements arising from the exploration of mineral resources
    d. The amounts of assets, liabilities, income and expenses and operating and investing cash
    flows arising from the exploration and evaluation of mineral resources

    7. Of the following costs related to the development of mineral resources, which one should not be
    included in depletable cost?
    a. Acquisition cost of the mineral resource deposit
    b. Exploration cost
    c. Tangible equipment cost associated with machinery used to extract the mineral resource
    d. Intangible development cost such as drilling cost, tunnel, and shaft

    8. Depletion expense
    a. Is usually part of cost of goods sold
    b. Includes tangible equipment cost in the depletion base
    c. Excludes intangible equipment cost from the depletion base
    d. Excludes restoration cost from the depletion base

    9. The most common method of recording depletion for accounting purposes is the
    a. Percentage of depletion method
    b. Straight line
    c. Production or output method
    d. Decreasing charge method

    PROBLEMS

    10. Shiena Corporation purchased mining property for P10,400,000 with estimated 8,000,000 tons
    of ore. The residual value of the property is P800,000. Building used in mine operations costs
    P800,000 and have estimated life of fifteen years with no residual value. Mine machinery costs
    P1,600,000 with an estimated residual value of P320,000 after its physical life of 4 years.

    Following is the summary of the company’s operations for 2021, the first year of operations.

    Tons mined 800,000 tons


    Tons sold 640,000 tons
    Unit selling price per ton P4.40
    Direct labor 640,000
    Miscellaneous mining overhead 128,000
    Operating expenses (excluding depreciation) 576,000

    Inventories are valued on a first-in, first-out basis. Depreciation on the building is to be allocated
    as follows: 20% to operating expenses, 80% to production. Depreciation on machinery is
    chargeable to production.

    Question 1: How much is the depletion for 2021?


    a. P768,000
    b. P192,000
    c. P960,000
    d. P1,040,000

    You might also like