IFA60 – Depletion of Natural Resources – Intermediate Accounting

Download the Workbook: http://www.tonybell.com Unlock 100+ Members Accounting Tutorials: https://www.youtube.com/channel/UCNFClg6mzfZ5ixpuH9c7f1A/join In This Video: We work through Problem 11-5A, shifting our focus from depreciation to the Depletion of Natural Resources. Using a scenario where Volt Resources acquires land containing lithium deposits, we first determine the total capitalized cost of the mine by combining the acquisition price, exploration costs, and the present value of the required future restoration costs. After deducting the estimated residual value, we calculate the depletion rate per ton of ore. We then prepare the critical journal entries to record the extraction of 400,000 tons into inventory, followed by the entry to recognize Cost of Goods Sold for the 350,000 tons actually sold during the year. Finally, we calculate the Net Book Value of the mine at year-end. Module Overview (IFA53–IFA61): This module explores the systematic allocation of asset costs and the rules for write-downs. We will examine the major depreciation methods (Straight-Line, Declining Balance, and Units-of-Production), handle partial-year depreciation, and navigate changes in accounting estimates. We will also dive into the specific calculations required for depleting natural resources and walk step-by-step through the strict testing rules and journal entries for asset impairment.