Question

Perez Company acquires an ore mine at a cost of $2,380,000. It incurs additional costs of $666,400 to access the mine, which is estimated to hold 1,700,000 tons of ore. 215,000 tons of ore are mined and sold the first year. The estimated value of the land after the ore is removed is $340,000. Calculate the depletion expense from the information given. (Round "Depletion per unit" to 3 decimal places.) Answer is complete but not entirely correct. Cost Salvage Amount subject to depletion Total units of capacity Depletion per unit Units extracted and sold in period Depletion expense $ 3,046,400 340,000 $ 1,950,000 1,700,000 1.147 X 215,000 $ 246,617 X 1. & 2. Prepare the entry to record the cost of the ore mine and year-end adjusting entry. No Transaction Answer is complete but not entirely correct. General Journal Debit 3,046,400 Credit Ore mine Cash 3,046,400

Answer 1

ANSWER

As per the given question,

1 Depletion Expense: 2 Cost 3 Salvage 4 Amount subject to depletion 5 Total units of capacity 6 Depletion per unit 7 Units extracted and sold in period 8 Depletion expense $3,046,400 $340,000 $2,706,400 1.700.000 $1.592 215,000 $342.280 Credit 10 1. & 2. General Journal 12 Ore mine 13 Cash 14 (To record ore mine acquired) Debit $3,046,400 $3,046,400 $342.280 16 Depletion expense 17 Accumulated depletion - Ore mine 18 (To record depletion expense) $342.280

Calculations are shown below: в с 1 Depletion Expense: 2 Cost 3 Salvage 4 Amount subject to depletion 5 Total units of capacity 6 Depletion per unit 7 Units extracted and sold in period 8 Depletion expense 1=2380000+666400 340000 =B2-B3 1700000 =B4/B5 215000 =B6 B7 Credit Debit =2380000+666400 =B12 10 1. & 2. 11 General Journal 12 Ore mine 13 Cash 14 (To record ore mine acquired) 15 16 Depletion expense 17 Accumulated depletion - Ore mine 18 (To record depletion expense) =B16

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