ACCCOB2 – FINANCIAL ACCOUNTING

MODULE 6 – PLANT ASSETS AND NATURAL RESOURCES

PROPERTY, PLANT, AND EQUIPMENT – include the various tangible assets used by the company to carry out its
operations. It is also known as plant assets, property assets, and or fixed assets.

Characteristics of Property, Plant, and Equipment (PPE):

• They are used in operations and not for sale.

• They are long-term in nature and benefit future period.
• They possess a physical substance (tangible in nature).

Recognition and Measurement

Recognition

• It is probable that future economic benefits associated with the asset will flow into the enterprise.
• The cost of the assets to the enterprise can be measured reliably.

Measurement

Property, plant, and equipment is measured at cost. This recognition principle is applied to all property, plant, and
equipment costs at the time of they were incurred.

Component of Cost

1. The cost of PPE, which comprises its purchase price, including import duties and non-refundable purchase taxes
after deducting trade and cash discounts.
2. Any directly attributable cost of bringing the asset to working condition an intended use.
3. Initial estimate of the costs of dismantling and removing the item and restoring the sites on which it is located,
the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the
item during a particular period for purposes other than to produce inventories during the period. These costs are
also called asset retirement obligations, which is included in the cost of PPE.

Determining the Cost of Specific Classes of Properties, Plants, and Equipment.

Land

The following items should be included in the cost of land:

• Purchase Price • Razing or removing unwanted buildings, less any

• Legal fees and other expenditures for salvage values
establishing a clean title • Grading and leveling
• Cost of relocation or reconstruction of property • Payments to tenants to induce them to vacate
belonging to others in order to acquire the the property
possession • Special assessments for paving a public street
• Broker’s commission bordering the land, including sidewalks, sewers,
• Fees for registration and transfer of title waterlines, and streetlights
• Surveying Fees
• Mortgages, encumbrances, and interest on such
mortgages assumed by the buyer
• Delinquent real estate taxes assumed by the
buyer
Illustration 1:

On March 1, 2020, Penney Company acquired real estate on which it planned to construct an office building in the future.
The company paid P8,000,000 in cash. An old warehouse on the property was razed at a cost of P28,600, and the salvaged
materials were sold for P2,700. Additional expenditure included P50,000 attorney’s fee for work concerning the land
purchase, P80,000 for the real estate broker’s fee, P100,000 for the real property taxes in arrears, and P400,000 for the
construction of a fence to enclose the property

What is the cost of the land?

Cash Paid ₱ 8,000,000.00

Real property taxes in arrears 100,000.00
Real estate broker's fee 80,000.00
Attorney's fee 50,000.00
Demolition cost 28,600.00
Proceeds from salvaged materials (2,700.00)
Total Cost of Land ₱ 8,255,900.00

The construction of the fence should be recorded as a land improvemen.

Buildings – If acquired

The acquisition cost of ready for use buildings includes the following:

• Purchase price • Unpaid taxes up to the date of acquisition

• Realtor commissions • Interest, liens, and other encumbrances on the
• Legal fees and other expenses incurred in building assumed by the buyer
connection with the purchase • Payments to tenants to induce them to vacate
• Reconditioning, renovation, and remodeling the building.
costs to put a building in a condition suitable for
its intended use

Buildings – if constructed

The following items should be included in the cost of the constructed building:

• Architect fees and superintendent fees • Cost of temporary safety fences around
• Cost of building permits or licenses construction and cost of subsequent removal
• Excavation costs thereof.
• Construction costs (materials, labor, overhead, • Safety inspection fees
interest on construction loans, and insurances) • Demolition cost incurred in tearing down an old
• Cost of temporary buildings used as construction building to give way for the construction of the
offices and tools, or materials shed replacement building
• Cost of service equipment and fixtures that are
made a permanent part of the structure
Illustration 2:

On April 1, 2020, Reardon Corporation purchased a parcel of land as a factory site. The construction was completed on
April 1, 2021. The costs incurred in the construction project are listed below:

Architect's fees ₱ 350,000.00

Construction cost 9,500,000.00
Landfill for building site 300,000.00
Clearing of trees from building site 96,000.00
Temporary building used for construction activities 79,000.00
Land survey 40,000.00
Excavation for basement 430,000.00
Proceeds from the sale of timbers 50,000.00

What is the cost of the building?

Architect's fees ₱ 350,000.00

Construction cost 9,500,000.00
Clearing of trees from building site 96,000.00
Temporary building used for construction activities 79,000.00
Excavation for basement 430,000.00
Proceeds from the sale of timbers (50,000.00)
Total cost of new building ₱ 10,405,000.00

Equipment, Machineries, Furniture, and Fixtures

The following items should be included in the cost of machinery, equipment, furniture, and fixtures:

• Purchase price (net of trade and cash discounts) • Modification for use
• Freight, handling, storage, and other costs • Repairs (purchase of used equipment)
related to the acquisition • Reconditioning (purchase of used equipment)
• Insurance while in transit • Initial estimate of cost of dismantling and
• Installation cost, including site preparation and removing the asset and restoring the site on
assembling which it is located.
• Cost of testing and trial run for use

Illustration 3

Machine A was purchased at an invoice price of P1,000,000, with the terms 2/10 net 30. The machine invoice was paid
after the discount period. Transportation charges amounted to P2,200, installation costs were P9,500, and the cost of a
trial run was P4,600. Normal repairs and maintenance for the first-year cost P4,100.

What is the cost of Machine A?

Purchase Price, net of discount (1,000,000 x 98%) ₱ 980,000.00

Installation costs 9,500.00
Trial run 4,600.00
Transportation costs 2,200.00
Total cost of Machine A ₱ 996,300.00
Land Improvements

The following items should be included in the cost of land improvements:

• Driveways • Drainage system

• Parking lots • Sidewalks
• Private roads • Pavements
• Fence • Cost of trees, shrubs, and other landscaping
• Water system

If sidewalks, pavements, parking lots, and driveway are part of the blueprint for the construction, they’re charged to
building account.

Illustration 4

Gavin Corporation paid the following expenditures to improve the land it acquired on March 31, 2020.

Installation of fences around the property ₱ 200,000.00

Cost of parking lots and driveways 450,000.00
Cost of trees and shrubbery planted 150,000.00
Assessment by the city government for drainage 23,000.00

What is the cost of the land improvements?

Installation of fences around the property ₱ 200,000.00

Cost of parking lots and driveways 450,000.00
Cost of trees and shrubbery planted 150,000.00
Total cost of land improvements ₱ 800,000.00

The assessment by the city government for drainage should be recorded as land.

Different Modes of Acquiring Plant Assets

1. Lump-Sum (Basket) Purchase

The acquisition cost is allocated among the assets purchased using their relative fair market value.

Illustration 5

Lennon Corporation purchased land, a warehouse, and an office building for P9,800,000. The estimated fair value of the
assets is P4,800,000 for the land, P3,600,000 for the warehouse, and P1,600,000 for the office building.

At what amounts should each of the three assets be recorded?

Fair Value Allocation Allocated Cost

Land ₱ 4,800,000.00 48.00% ₱ 4,704,000.00
Warehouse 3,600,000.00 36.00% 3,528,000.00
Office Building 1,600,000.00 16.00% 1,568,000.00
₱ 10,000,000.00 100.00% ₱ 9,800,000.00
 2. Deferred Payment or Purchase on Account

PPE are often purchased under deferred payment contracts. This means the purchaser issues a note payable for
the amount due and pays it in several installments.

a. The purchase price of the PPE is available

Illustration 6

Joash Company purchased a machine for P200,000 on January 1, 2020 and agreed to pay the entire amount in four
installments of P50,000 each beginning on December 31, 2020, plus an annual interest of 10% on the balance.

How much is the cost of machine?

The cost if machine is P200,000, which is equal to the cash price.

b. The cash price equivalent is indeterminable

Illustration 7

The company purchased equipment under a deferred payment contract: P40,000 down payment and ten semiannual
payments of P25,000. Assume an effective interest rate of 12%.

How much is the cost of the equipment?

How much is the discount on notes payable?

Down payment ₱ 40,000.00 Face Value of the note ₱ 250,000.00

Present Value of the Note 184,002.00 Present Value of the Note (184,002.00)
Cost of the Equipment ₱ 224,002.00 Discount on Notes Payable ₱ 65,998.00

3. Issuance of Equity (Shares) Securities

When the companies acquire property assets by issuing equity securities, such as ordinary shares, the cost of the
assets acquired is measured using the following hierarchy:

• Fair value of the asset received

• Fair value of the shares issued
• Par value of the shares issued

Illustration 8

Robbie Company purchased land with a current market value of P2,400,000. In exchange for the land, Robbie issued
20,000 shares of its ordinary share, par P100, with an estimated market value of P140 per share. Robbie Company’s share
is not traded on an established stock exchange.

What is the amount should Robbie Company record as the cost of the land?

The cost of the land is P2,400,000, which is the fair market value of the asset received.

4. Donations

The cost of the asset received through donations is the fair market value of the asset received, plus any incidental
cost incurred.
 5. Exchanges

Sometimes, a company trades or exchanges an old asset for a new one and pay the difference between the value
of the old asset and the new one.

• If the transaction has commercial substance, the cost of the asset is recognized based on the fair market
value of the old asset plus any cash consideration on the transaction.
• If the transaction has no commercial substance, the cost of the asset is recognized based on the carrying
value of the old asset plus any cash consideration on the transaction.
• Gain or loss on the transaction with commercial substance should be recognized. Gain or loss on the
exchange is the difference between the fair market value and carrying value of the old asset.

Illustration 9

On May 1, 2020, Feline Company acquired a new delivery truck in exchange for an old delivery truck. The old truck was
purchased for P875,000 and had a book value of P332,500. On the date of the exchange, the old truck had a fair market
value of P350,000. In addition, Feline Company paid P1,137,500 worth of cash for the new truck.

a. If the exchange has commercial substance, at what amount should Feline Company record the new truck for
financial account purposes?
b. If the exchange lacks commercial substance, at what amount should Feline Company record the new truck for
financial accounting purposes?
c. If the exchange has commercial substance, how much is the gain or loss on the exchange?

a. Fair value of the old truck ₱ 350,000.00

Cash Paid 1,137,500.00
Cost of the new truck ₱ 1,487,500.00

b. Carrying value of the old truck ₱ 332,500.00

Cash paid 1,137,500.00
Cost of the new truck ₱ 1,470,000.00

c. Fair value of the old truck ₱ 350,000.00

Carrying value of the old truck (332,500.00)
Gain on the exchange ₱ 17,500.00

Cost Incurred Subsequent to Acquisition

Subsequent cost are incurred by the companies in addition to the initial acquisition cost. These costs are capitalized only
when probable that future economic benefit will flow into the enterprise in excess of the original assess standard of
performance.

• Extend useful life • Substantially improve output quality

• Increase capacity • Enable substantial reduction in operating cost

Subsequent expenditure (revenue expenditure) should be expensed when they:

• Maintain a given level of services • Benefit only the current period

Major Type of Expenditures

1. Additions – These are modifications or alterations which increases the physical size or capacity of an asset
 2. Improvements or betterments – These are modifications or alterations which increase the service life or the
capacity of an asset.
3. Replacements – These involve substitution; however, the new asset is not necessarily better than the old asset.
4. Rearrangement – This is the relocation or reinstallation of an asset.

Measurement Subsequent to Initial

• Cost Model – The asset is carried at cost less accumulated depreciation and impairment.
• Revaluation Model – The asset is carried at revalued amount, which is its fair value at the date of revaluation less
subsequent depreciation, provided that the fair value can be measured reliably.

Depreciation

It is the allocation of an asset’s cost to the expenses, in a systematic and rational manner, over the periods that are
expected will benefit from the use of the asset.

Note: All plant assets, except land, decrease in value and usefulness due to the passage of time.

Kinds of Depreciation

• Physical Depreciation – This is related to the wear and tear and deterioration of an asset as it is used over time.
• Functional or Economic Depreciation – This is related to market conditions that cause an asset to become
obsolete and inadequate.

Factors of Depreciation

• Depreciable Base or Depreciation Cost – The cost of an asset minus the estimated residual value.
• Scrap Value / Residual Value / Salvage Value – The amount estimated to be recovered when an asset is retired
from use.
• Estimated Useful Life – The expected economic or service life of an asset, which can be expressed in terms of the
following:
o Time period in years or months
o Working hours or service hours
o Unit of output or production

Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to the depreciation expense
since the asset was put into service.

Note: Depreciation begin when an asset is available for use. Depreciation does not stop when the asset becomes idle or
retired from active use unless the asset is fully appreciated. It ceases if the asset is classified as held for sale.

Methods of Depreciation

1. Straight-line method – This method of depreciation considers a function of time rather than function of usage.

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = (𝐶𝑜𝑠𝑡 − 𝑆𝑐𝑟𝑎𝑝 𝑉𝑎𝑙𝑢𝑒)/(𝐿𝑖𝑓𝑒 𝑖𝑛 𝑌𝑒𝑎𝑟𝑠) 𝑜𝑟 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛

= (𝐶𝑜𝑠𝑡 − 𝑆𝑐𝑟𝑎𝑝 𝑉𝑎𝑙𝑢𝑒) 𝑥 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑅𝑎𝑡𝑒

2. Activity Method – This method of depreciation bases depreciation on usage rather than time
a. Working Hours Method

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = ((𝐶𝑜𝑠𝑡 − 𝑆𝑐𝑟𝑎𝑝 𝑉𝑎𝑙𝑢𝑒)/(𝐿𝑖𝑓𝑒 𝑖𝑛 𝑇𝑒𝑟𝑚𝑠 𝑜𝑓 𝐻𝑜𝑢𝑟𝑠)) 𝑥 𝐴𝑐𝑡𝑢𝑎𝑙 𝐻𝑜𝑢𝑟𝑠

b. Output or Production Method
 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = ((𝐶𝑜𝑠𝑡 − 𝑆𝑐𝑟𝑎𝑝 𝑉𝑎𝑙𝑢𝑒)/(𝐿𝑖𝑓𝑒 𝑖𝑛 𝑇𝑒𝑟𝑚𝑠 𝑜𝑓 𝑈𝑛𝑖𝑡𝑠)) 𝑥 𝑈𝑛𝑖𝑡𝑠 𝑜𝑓 𝑂𝑢𝑡𝑝𝑢𝑡

3. Decreasing Charge or Accelerated Method – This method yields a high depreciation expense during the early
years of an asset’s life and low depreciation expense during the latter years.

a. Sum-of-the-years’ Digit Method

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = (𝐶𝑜𝑠𝑡 − 𝑆𝑐𝑟𝑎𝑝 𝑉𝑎𝑙𝑢𝑒) 𝑥 (𝑅𝑒𝑚𝑎𝑖𝑛𝑖𝑛𝑔 𝐿𝑖𝑓𝑒)/(𝑆𝑢𝑚 𝑜𝑓 𝑡ℎ𝑒 𝑌𝑒𝑎𝑟𝑠 𝐷𝑖𝑔𝑖𝑡)

𝑆𝑢𝑚 𝑜𝑓 𝑡ℎ𝑒 𝑌𝑒𝑎𝑟𝑠 𝐷𝑖𝑔𝑖𝑡 = (𝑛 (𝑛 + 1))/2

b. Double Declining Balance Method

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = 𝐷𝑒𝑐𝑙𝑖𝑛𝑖𝑛𝑔 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑥 2 𝑥 𝑆𝑡𝑟𝑎𝑖𝑔ℎ𝑡 𝐿𝑖𝑛𝑒 𝑅𝑎𝑡𝑒

Illustration 10

A machine that costs P300,000 is acquired on January 1, 2020, It is estimated residual value is P30,000, and its expected
useful life is eight years, with an estimated production of 200,000 units and 50,000 working hours. In 2020, the company
produced 18,000 units and used the machinery for 7,000 hours.

Calculate the depreciation expense for the year under each of the following methods:

a. Straight-line method
b. Output method
c. Working hours method
d. Double declining method
e. Sum-of-the-year’s digits method

a. Straight-Line Method:

(𝐶𝑜𝑠𝑡 − 𝑆𝑎𝑙𝑣𝑎𝑔𝑒 𝑉𝑎𝑙𝑢𝑒) (𝑃300,000 − 𝑃30,000)

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = = = 𝑷𝟑𝟑, 𝟕𝟓𝟎
𝐿𝑖𝑓𝑒 𝑖𝑛 𝑌𝑒𝑎𝑟𝑠 8 𝑌𝑒𝑎𝑟𝑠

b. Output Method:

(𝐶𝑜𝑠𝑡 − 𝑆𝑎𝑙𝑣𝑎𝑔𝑒 𝑉𝑎𝑙𝑢𝑒) (𝑃300,000 − 𝑃30,000)

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = ( ) 𝑥 𝑂𝑢𝑡𝑝𝑢𝑡 = ( ) 𝑥 18,000 𝑢𝑛𝑖𝑡𝑠 = 𝑷𝟐𝟒, 𝟑𝟎𝟎
𝐿𝑖𝑓𝑒 𝑖𝑛 𝑇𝑒𝑟𝑚𝑠 𝑜𝑓 𝑂𝑢𝑡𝑝𝑢𝑡 200,000 𝑢𝑛𝑖𝑡𝑠

c. Working Hours Method:

(𝐶𝑜𝑠𝑡 − 𝑆𝑎𝑙𝑣𝑎𝑔𝑒 𝑉𝑎𝑙𝑢𝑒) (𝑃300,000 − 𝑃30,000)

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = ( ) 𝑥 𝐴𝑐𝑡𝑢𝑎𝑙 𝐻𝑜𝑢𝑟𝑠 = ( ) 𝑥 7,000 = 𝑷𝟑𝟕, 𝟖𝟎𝟎
𝐿𝑖𝑓𝑒 𝑖𝑛 𝑇𝑒𝑟𝑚𝑠 𝑜𝑓 𝐻𝑜𝑢𝑟𝑠 50,000 ℎ𝑜𝑢𝑟𝑠

d. Double Declining Method

1 1
𝐷𝑜𝑢𝑏𝑙𝑒 𝐷𝑒𝑐𝑙𝑖𝑛𝑖𝑛𝑔 𝑅𝑎𝑡𝑒 = ( ) 𝑥2= ( ) = 25%
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑈𝑠𝑒𝑓𝑢𝑙 𝐿𝑖𝑓𝑒 8 𝑦𝑒𝑎𝑟𝑠

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = 𝐷𝑒𝑐𝑙𝑖𝑛𝑖𝑛𝑔 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑥 𝑅𝑎𝑡𝑒 = 𝑃300,000 𝑥 25% = 𝑷𝟕𝟓, 𝟎𝟎𝟎

 e. Sum-of-the-year’s digit Method:

𝑛(𝑛 + 1) 8 𝑥 (8 + 1)
𝑆𝑢𝑚 𝑜𝑓 𝑡ℎ𝑒 𝑌𝑒𝑎𝑟𝑠 𝐷𝑖𝑔𝑖𝑡 = = = 36
2 2

𝑅𝑒𝑚𝑎𝑖𝑛𝑖𝑛𝑔 𝑌𝑒𝑎𝑟𝑠 8
𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = (𝐶𝑜𝑠𝑡 − 𝑆𝑎𝑙𝑣𝑎𝑏𝑒 𝑉𝑎𝑙𝑢𝑒) 𝑥 ( ) = (𝑃300,000 − 𝑃30,000) 𝑥 ( ) = 𝑷𝟔𝟎, 𝟎𝟎𝟎
𝑆𝑢𝑚 𝑜𝑓 𝑡ℎ𝑒 𝑌𝑒𝑎𝑟𝑠 36

NATURAL RESOURCES – Material objects of economic value and utility to man produced by nature, it is also known as
wasting assets.

Cost of Natural Resources

1. Acquisition Cost – These include the amounts paid to obtain the property containing the natural resources.
2. Exploration and Evaluation Cost – These are the costs incurred in an attempt to locate the natural resources that
can be economically extracted or exploited. Mining companies may use the following methods:
a. Successful effort method – this advocate capitalizing only the cost of successful wells, while unsuccessful
exploration are expenses as incurred.
b. Full cost method – this advocate capitalizing the cost of drilling all oil wells.
3. Development Cost – These are costs incurred to exploit or extract the natural resources that has been located.
4. Restoration Cost – These are costs to restore a property to its natural state after extraction has occurred.

Depletion is the systematic allocation of the cost or other basic value of a wasting asset over the period the natural
resource is extracted or produced.

Factors of Depletion

1. Depletion Base – This includes the acquisition cost, development costs, exploration and evaluation costs, and
restoration costs.
2. Salvage Value – This is the amount expected to be derived from the sale of the property after extraction activities.
3. Estimated Useful Life – This is the life of wasting assets in terms of output extracted or mined.

(𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 − 𝑆𝑎𝑙𝑣𝑎𝑔𝑒 𝑉𝑎𝑙𝑢𝑒)

𝐷𝑒𝑝𝑙𝑒𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑈𝑛𝑖𝑡 =
𝑇𝑜𝑡𝑎𝑙 𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑈𝑛𝑖𝑡𝑠

𝐷𝑒𝑝𝑙𝑒𝑡𝑖𝑜𝑛 = 𝐷𝑒𝑝𝑙𝑒𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑈𝑛𝑖𝑡 𝑥 𝑈𝑛𝑖𝑡𝑠 𝐸𝑥𝑡𝑟𝑎𝑐𝑡𝑒𝑑

Note: The depreciation of the tangible equipment (plant asset) used in the development of a wasting asset is computed
over the life of the equipment or the life of the wasting asset, whichever is shorter.

Illustration 10

A wasting asset company has acquired the right to use a property to explore a natural resource. The acquisition cost is
P10.5 million, the related exploration costs amounted to P3 million, and development costs incurred in erecting wells and
drilling the deposit ores amounted to P7.5 million. It is estimated that the resource deposit are 1.5 million in units. During
the first year, 300,000 units were extracted, while 250,000 units were sold for P40 per unit.

Calculate the following:

a. How much is the cost of the wasting assets?

b. How much is the depletion rate per unit?
c. How much is the amount of depletion for the year?
d. How much is the depletion included in the cost of goods sold?
e. How much is the depletion included in cost of ending inventory?

a. Cost of the Wasting Asset

Purchase Price ₱ 10,500,000.00

Exploration Cost 3,000,000.00
Development Cost 7,500,000.00
Total Cost of Wasting Asset ₱ 21,000,000.00

b. Depletion Rate per Unit

Total Cost of Wasting Asset ₱ 21,000,000.00

Estimate Resource Deposit 1,500,000.00
Depletion Rate per Unit ₱ 14.00

c. Depletion of the Year

Depletion Rate per Unit ₱ 14.00

Units Extracted 300,000.00
Depletion for the Year ₱ 4,200,000.00

d. Cost of Goods Sold

Depletion Rate per Unit ₱ 14.00

Units Sold 250,000.00
Cost of Goods Sold ₱ 3,500,000.00

e. Ending Inventory

Depletion Rate per Unit ₱ 14.00

Units in Ending Inventory 50,000.00
Cost of Goods Sold ₱ 700,000.00