Question

On January 2, 2019, Whistler Company purchased land for $420,000, from which it is estimated that 440,000 tons of ore could be extracted. It estimates that the present value of the cost necessary to restore the land is $77,000, after which it could be sold for $24,000.

During 2019, Whistler mined 76,000 tons and sold 56,000 tons. During 2020, Whistler mined 105,000 tons and sold 106,000 tons. At the beginning of 2021, Whistler spent an additional $100,000, which increased the reserves by 68,000 tons. In 2021, Whistler mined 152,000 tons and sold 149,000 tons. Whistler uses a FIFO cost flow assumption.

Required:

If required, round the depletion rate to the nearest cent and round the final answers to the nearest dollar.

1. Calculate the depletion included in the income statement and ending inventory for 2019, 2020, and 2021.

2019	Depletion deducted from income	$
	Depletion included in inventory	$
2020	Depletion deducted from income	$
	Depletion included in inventory	$
2021	Depletion deducted from income	$
	Depletion included in inventory	$

Answer 1

2019 unit depletion rate = [420000 + 77000 - 24000 ] / 440000 = 1.08 per ton

2021 unit depletion rate = [224520 + 77000 - 24000 +100000 ] / [440000-181000+68000]  = 1.15 per ton

2019	Depletion deducted from income [56000 * 1.08]	$	60480
	Depletion included in inventory [20000*1.08]	$	21600
2020	Depletion deducted from income [106000 *1.08]	$	114,480
	Depletion included in inventory [(20000+105000-106000) *1.08]	$	20520
2021	Depletion deducted from income [(19000*1.08)+(130000*1.15)]	$	170020
	Depletion included in inventory [ 19000 + 152000-149000]*1.15	$	25300