Question

eBook Show Me How Calculator Print item Depletion Hidden Hollow Mining Co. acquired mineral rights for $24,500,000. The mineral deposit is estimated at 35,000,000 tons. During the current year, 10,150,000 tons were mined and sold. a. Determine the depletion rate. If required, round your answer to two decimal places. per ton b. Determine the amount of depletion expense for the current year. Similar to the units of production method to depreciate a fred asset the depletion rate that is calculated stays constant no matter how much of the natural resource is extracted Leaming Objective 4 c. Joumalize the adjusting entry on December 31 to recognize the depletion expense. Dec. 31 Depletion Expense Acumulated Depletion Check My Work < Previous Next > O e 10 QADA 11/12/2019

Answer 1

Answera. Cost of mineral rights = $24,500,000 Estimated extraction = 35,000,000 tons Depletion rate perton = Cost of mineral rights / Estimated extraction Depletion rate perton = $24,500,000 / 35,000,000 Depletion rate perton = $0.70 Answerb. Extraction during the first year = 10,150,000 tons Depletion expense for first year= Depletion rate perton * Extraction during the first year Depletion expense for first year = $0.70 * 10,150,000 Depletion expense for first year = $7,105,000 Answerc. Credit Date Dec. 31 General Journal Depletion Expense Accumulated Depletion Debit 7,105,000 7,105,000