Question

Depletion Entries

Alaska Mining Co. acquired mineral rights for $10,514,000. The mineral deposit is estimated at 75,100,000 tons. During the current year, 11,250,000 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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Answer 1

a.

Depletion expense for the current year

Depletion rate per ton = $10,514,000 / 75,100,000 tons

= $0.14 per ton

Depletion expense = Depletion rate * Number of tons mined and sold

= $0.14 * 11,250,000

= $1,575,000

Depletion expense for the current year is $1,575,000

b.

Adjusting entry

Date	Accounts titles and explanation	Debit	Credit
December 31	Depletion expense	$1,575,000
	... Accumulated Depletion		$1,575,000
	(To record the depletion expense)