Question

Alaska Mining Co. acquired mineral rights for $16,587,000. The mineral deposit is estimated at 87,300,000 tons. During the current year, 13,100,000 tons were mined and sold. a. Determine the amount of depletion expense for the current year. Round the depletion rate to two decimals places. $ b. Journalize the adjusting entry on December 31 to recognize the depletion expense.

Answer 1

Answer

a.

Depletion Rate per unit = Total cost of rights / Total Mineral Diposit

= $16,587,000 / 87,300,000 tons

= $0.19 per tonn

Depletion expense will be $0.19 per tonn.

Depletion expense for Current Year = Depletion rate * 13,100,000 tons

Depletion expense for Current Year= $2,489,000

b.

Depletion Expense (Dr.) $2,489,000

Accumulated Depletion Expense (Cr.) $2,489,000

(Being adjustment entry for Depletion expense recorded)

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