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A mine is taken on lease for a period of 5 years by paying lump sum amount of 25,00,000/-during the lease period, the expected output is 2,00,000 kgs. actual output during the period is as follows: ) annual production (units 34,000 36,000 43000 37000 45000 show the amount of depreciation under depletion method.?
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A mine is taken on lease for a period of 5 years by paying lump sum am...
Calculation of Depreciation under Depletion Method
1. Calculation of Depletion Rate
- Depletion Rate = Total Cost of Mine / Total Expected Output
- Total Cost of Mine = Lump sum amount paid for lease = Rs. 25,00,000
- Total Expected Output = 2,00,000 kgs
- Depletion Rate = 25,00,000 / 2,00,000 = Rs. 12.5 per kg
2. Calculation of Annual Depreciation
- Annual Depreciation = Depletion Rate x Actual Production
- Year 1: 34,000 kgs x Rs. 12.5 = Rs. 4,25,000
- Year 2: 36,000 kgs x Rs. 12.5 = Rs. 4,50,000
- Year 3: 43,000 kgs x Rs. 12.5 = Rs. 5,37,500
- Year 4: 37,000 kgs x Rs. 12.5 = Rs. 4,62,500
- Year 5: 45,000 kgs x Rs. 12.5 = Rs. 5,62,500
3. Total Depreciation over 5 years
- Total Depreciation = Rs. 4,25,000 + Rs. 4,50,000 + Rs. 5,37,500 + Rs. 4,62,500 + Rs. 5,62,500
- Total Depreciation = Rs. 24,37,500
Therefore, the amount of depreciation under the depletion method over the 5-year lease period is Rs. 24,37,500. This method is used to allocate the cost of natural resources over the period they are expected to be used, based on the actual production during that period.
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A mine is taken on lease for a period of 5 years by paying lump sum amount of 25,00,000/-during the lease period, the expected output is 2,00,000 kgs. actual output during the period is as follows: ) annual production (units 34,000 36,000 43000 37000 45000 show the amount of depreciation under depletion method.?
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A mine is taken on lease for a period of 5 years by paying lump sum amount of 25,00,000/-during the lease period, the expected output is 2,00,000 kgs. actual output during the period is as follows: ) annual production (units 34,000 36,000 43000 37000 45000 show the amount of depreciation under depletion method.? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about A mine is taken on lease for a period of 5 years by paying lump sum amount of 25,00,000/-during the lease period, the expected output is 2,00,000 kgs. actual output during the period is as follows: ) annual production (units 34,000 36,000 43000 37000 45000 show the amount of depreciation under depletion method.? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A mine is taken on lease for a period of 5 years by paying lump sum amount of 25,00,000/-during the lease period, the expected output is 2,00,000 kgs. actual output during the period is as follows: ) annual production (units 34,000 36,000 43000 37000 45000 show the amount of depreciation under depletion method.?.
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