Question

Montana Mining Co. pays $3,653,830 for an ore deposit containing 1,589,000 tons. The company installs machinery in the mine costing $198,600. Both the ore and machinery will have no salvage value after the ore is completely mined. Montana mines and sells 148,500 tons of ore during the year.

Prepare the year-end 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

• Record the year-end adjusting entry for the depletion expense of ore mine.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Dec 31

Record the year-end adjusting entry for the depreciation expense of the mining machinery.

Date	General Journal	Debit	Credit
Dec 31

Selected accounts from Ridley Co.’s adjusted trial balance for its December 31 year-end follow.

Copyrights	$	10,600		Trademarks	$	22,800
Inventory		8,800		Cash		10,800
Accumulated amortization—Copyrights		3,800		Buildings		94,200
Accumulated depreciation—Buildings		20,800		Land		37,800

Prepare the assets section of its classified balance sheet.

Selected accounts from Ridley Co.’s adjusted trial balance for its December 31 year-end follow.

Copyrights	$	10,600		Trademarks	$	22,800
Inventory		8,800		Cash		10,800
Accumulated amortization—Copyrights		3,800		Buildings		94,200
Accumulated depreciation—Buildings		20,800		Land		37,800

Prepare the assets section of its classified balance sheet.

Tory Enterprises pays $247,400 for equipment that will last five years and have a $44,500 salvage value. By using the equipment in its operations for five years, the company expects to earn $89,400 annually, after deducting all expenses except depreciation.

Calculate annual depreciation expenses using double-declining-balance method.
Prepare a table showing income before depreciation, depreciation expense, and net (pretax) income for each year and for the total five-year period, assuming double-declining-balance depreciation is used.

Calculate annual depreciation expenses using double-declining-balance method.

	Depreciation for the Period			End of Period
Year	Beginning of Period Book Value	Depreciation Rate	Annual Depreciation	Accumulated Depreciation	Book Value
Year 1
Year 2
Year 3
Year 4
Year 5
Total

Prepare a table showing income before depreciation, depreciation expense, and net (pretax) income for each year and for the total five-year period, assuming double-declining-balance depreciation is used. (Net loss should be entered with a minus sign.)

	Income Before	Depreciation	Net (Pretax)
	Depreciation	Expense	Income (Loss)
Year 1
Year 2
Year 3
Year 4
Year 5
Totals

Answer 1

Answer:1

Dec. 31	Depletion Expense—Mineral Deposit................	341,550
		Accumulated Depletion—Mineral Deposit....		341,550
		Record depletion [$3,653,830/1,589,000 tons = $2.30 per ton; 148,500 tons x $2.30 = $341,550].
	Dec. 31	Depreciation Expense—Machinery ...................	17,820
		Accumulated Depreciation—Machinery........		17,820
		Record depreciation [$198,600/1,589,000 tons= $0.12 per ton; 148,500 tons x $0.12 = $17,820]. Answer:3 Depreciation Income before Depreciation Depreciation Expense* Net (loss) Income Year 1............ $ 89400 $98960 ($9560) Year 2............ 89400 59376 30024 Year 3............ 89400 44574 44826 Year 4............ 89400 0 89400 Year ....5 89400 0 89400 a*. Rate = 2/5 = .40 or 40% Depreciation expenses: Year 1: $247400 × 40% = $98960 Year 2: ($247400 – $98960) × 40% = $59376 Year 3: $44574 max. depreciation expense (calculated as $247400 – $44500 – $98950 – $59376= $44574)