On January 2, 2019, Whistler Company purchased land for $450,000, from which it is estimated that 400,000 tons of ore could be extracted. It estimates that the present value of the cost necessary to restore the land is $80,000, after which it could be sold for $30,000.
During 2019, Whistler mined 80,000 tons and sold 50,000 tons. During 2020, Whistler mined 100,000 tons and sold 120,000 tons. At the beginning of 2021, Whistler spent an additional $100,000, which increased the reserves by 60,000 tons. In 2021, Whistler mined 140,000 tons and sold 130,000 tons. Whistler uses a FIFO cost flow assumption.
Required:
1. Calculate the depletion included in the income statement and for 2019, 2020, and 2021.
Round the depletion rate to 2 decimal places.
2. Prepare the natural resources section of the on December 31, 2019, 2020, and 2021, assuming that an accumulated depletion account is used.
3. Assume Whistler’s was 8%. What is the balance in the asset retirement obligation at 2019, 2020, and 2021?
