Question

On April 2, 2018, Montana Mining Co. pays $3,620,040 for an ore deposit containing 1,428,000 tons. The company installs machinery in the mine costing $187,600, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Montana begins mining on May 1, 2018, and mines and sells 184,800 tons of ore during the remaining eight months of 2018.
  
Prepare the December 31, 2018, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine’s depletion. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

Answer 1

Date	Account Titles and Explanation	Debit ($)	Credit ($)
Dec 31	Depletion expense - Mineral Deposit A/c	4,68,476
	To Accumulated Depletion - Mineral deposit A/c		4,68,476
	[Journal Entry to record Depletion expense - Mineral Deposit]
Dec 31	Depreciation Expense – Machinery A/c	24,278
	To Accumulated Depreciation – Machinery A/c		24,278
	[Journal Entry to record Depreciation Expense – Machinery]

Depletion Expense - Mineral Deposit

Rate per ton = 36,20,040 / 14,28,000 = $ 2.535042 per Ton

Depletion Expense = 1,84,800 Ton x $2.535042 per Ton = $4,68,476

Depreciation Expense – Machinery

Rate per ton = $187,600 / 14,28,000 = $0.131373 per Ton

Depreciation Expense = 1,84,800 Ton x $0.131373 per Ton = $24,278