Question

At the beginning of 2020, Blossom Company, a small private company, acquired a mine for $2,160,000. Of this amount, $160,000 was allocated to the land value and the remaining portion to the minerals in the mine. Surveys conducted by geologists found that approximately 19 million units of ore appear to be in the mine. Blossom had $215,000 of development costs for this mine before any extraction of minerals. It also determined that the fair value of its obligation to prepare the land for an alternative use when all of the minerals have been removed was $65,000. During 2020, 2.5 million units of ore were extracted and 2.10 million of these units were sold.

Calculate the depletion cost per unit for 2020. (Round answer to 3 decimal places, e.g. 52.751.)

Depletion cost per unit

$enter the Depletion cost per unit in dollars rounded to 3 decimal places

  

Prepare the required journal entry, if any, for the total amount of depletion for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Prepare the required journal entry, if any, for the total amount that is charged as an expense for 2020 for the cost of minerals sold during 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Answer 1

Cost of Mine	2160000
Add: Developmental costs	215000
Add: Fair value of Obligation	65000
Less: Value of Land	-160000
Cost for Depletion	2280000
Divide by total units	19000000
Depletion per unit	0.120
Account Titles and Explanation	Debit	Credit
Inventory	300000		=2500000*0.12
Accumulated Depletion		300000
Account Titles and Explanation	Debit	Credit
Cost of goods sold	252000		=2100000*0.12
Inventory		252000