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Depletion Entries Alaska Mining Co. acquired mineral rights for $23,560,000. The mineral deposit is estimated at...


Depletion Entries

Alaska Mining Co. acquired mineral rights for $23,560,000. The mineral deposit is estimated at 117,800,000 tons. During the current year, 17,650,000 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.
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Homework Answers

Answer #1

Depletion cost is the estimated cost of natural resource that is removed from its natural settling.

To calculate the depletion cost we have to first calculate the cost of the natural resource that has been mined and sold. This can be calculated as below.

b---

The below JE will be recorded at 31 dec to record the depletion cost

This depletion cost will be transferred to the accumulate depreciation reserve like we do in case of fixed assets.

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