Skysong Corporation acquires a coal mine at a cost of $424,000.
Intangible development costs total $106,000. After extraction has
occurred, Skysong must restore the property (estimated fair value
of the obligation is $84,800), after which it can be sold for
$169,600. Skysong estimates that 4,240 tons of coal can be
extracted.
If 742 tons are extracted the first year, prepare the journal entry
to record depletion. (If no entry is required, select
"No entry" for the account titles and enter 0 for the amounts.
Credit account titles are automatically indented when amount is
entered. Do not indent manually.)
Cost of mine = $424,000
Intangible development costs = $106,000
Cost of restoration = $84,800
Salvage value = $169,600
Depletion expense per ton = (Cost of mine + Intangible development costs + Cost of restoration - Salvage value)/Estimated coal ton
= (424,000+106,000+84,800-169,600)/4,240
= $105
Depletion expense for year 1 = Depletion expense per ton x Tons of coal extracted
= 105 x 742
= $77,910
General Journal | Debit | Credit |
Depletion expense | $77,910 | |
Coal mine | $77,910 |
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Skysong Corporation acquires a coal mine at a cost of $424,000. Intangible development costs total $106,000....
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