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    8 DEPRECIATION AND DEPLETION DEPRECIATION AND DEPLETION 189 TE the company had a gross income for this coal iiest two yeare, and P300 per ton for Tt can seil the 01 unit for #20,000. How much nev capital vill be required for the purchase? 7-10 (M-E- Board, October 1988) 3 tax and duty free importation of a 30-horsepower sandmill for paint manufacturing costs P360,000. Bank charges, arrai tre and brokerage cost ®5,000. Foundation and installation costs were F25,000. Other incidental expenses anount to ¥20,000. Salvage value of the mill is expected to be #60,0 after 20 yeare. Find the appraisal value of the mill using Straight-line depreciation at the end of (a) 10 years, years. sing the larger values for the tvo methods, and Ieonpute the percent of the initial cost that has been ten off in the rive years. i) The Carryall Trucking Company uses three delivery ‘ost #100,000; #120, 1,000. The esti- values are #20, 100; and #35,000. All » expected service jon rate and annual depreciation. (7 The Rainbow Electric Company uses three production ma- ies aescribed below. ine Type of Machine First Cost Salvage Value Life P7-11 A trenching machine may be used to dig irrigation aii or pipeline trenches. A contractor purchases one for ®400;| ‘and he estimates that it will be able to dig 500,000 meters during its life and he expects to receive P5,000 a: ap * value when he gelis it. During a certain year he used the cutting machine 30,000 75,000 8 nachine to dig 90,000 meters of trench. Determine the dep! 2 Drill press 22,000 4,000 6 3 Sanding machine 000 1,500 5 ciation cost for that ¥% nine (a) the composite 1ife, (b) the composite deprecia- 7-12 A mining company invested #25,000,000 to develop an Bhs cudicas euctenseuntanirartatite, well which is estimated to contain 1,000,000 barrels of off During a certain year, 200,000 barrels vere produced fron #1 well. Compute the depletion charge during the year. i) The San Fernando Manufacturing Company owns four dif- production machines vith data tabulated belov. Machine Number First Salvage Expected 7-13. The total gross income of the oi1 company in Problem apc tee ee mec 7-12 from the 200,000 barrels of oi1 produced 1s R30, 000, ‘The taxable income after deducting all expenses exciuding 1 8 40,000 12,000 12 Geptetion is P11,800,000. Determine the allovabie depletion 2 5 32,000 10 allowance for the year. 3 4 18,000 10 4 4 24,000 8 P7-14 paring a certain month, a mining company has = gross Income of P6,500,000 from the production of gold. The ex ses for this month excluding depletion is P4,200,000. Tf fixed depletion rate for golé is 15%, wnat {s the depletion allowance for this month? / nif of the machines of each kind vill be replaced after ifs and the rest vill be sold after 12 years. Compute Yotar annuai straight-line depreciation charges by (a) the depreciation method, and (b) the composite depreciation 0. P7-15 A coal mining company has ovned a mine for the past. five years. During this time the following tonnage of ore been removed each year: 25,000; 32,000; 36,000; 30,000; ant 28,000 tons. The mine is estimated to contain a total of 500,000 tons of coal. Twe initial cost of the mine is Solve Example 7-10 using th gata. However, cal~ je the actual annual depreciation by assuming that the ny uses a service life of 8 years for all models and one- fof the salvage values.

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