Question

Perez Company acquires an ore mine at a cost of $3,080,000. It incurs additional costs of $862,400 to access the mine, which is estimated to hold 2,200,000 tons of ore. 240,000 tons of ore are mined and sold the first year. The estimated value of the land after the ore is removed is $440,000. Calculate the depletion expense from the information given.

Cost
Salvage
Amount Subject to depletion
Total units of capacity
Depletion per unit
Units extracted and sold in period
Depletion Expense

Prepare the entry to record the cos of the one mine and year-end adjusting entry.

Answer 1

Cost	3,942,400
Salvage	440,000
Amount subjected to depletion	3,502,400
Total units	2,200,000
Depletion per unit	1.592
Units extracted and sold	240,000
Depletion expense	382,080

.

1	Ore mine	3,942,400
	Cash		3,942,400
2	Depletion expense	382,080
	Accumulated depletion		382,080