Question

Depletion Earth's Treasures Mining Co. acquired mineral rights for $104,000,000. The mineral deposit is estimated at 65,000,000 tons. During the current year, 20,150,000 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. C. Journalize the adjusting entry on December 31 to recognize the depletion expense. Dec. 31

Answer 1

SOLUTION : 1
	CALCULATION OF THE DEPLETION RATE PER TON
	Purchase Cost of Mineral Rights	$         10,40,00,000
	Less: Salvage Value =	$                               -
	Net Value for Depletion (A)	$         10,40,00,000
	No. of Ton Expected to produce	6,50,00,000	Ton
	Depreciation per Units = (A/B)	$                          1.60	Per Ton
Answer = $ 1.60 Per Ton
SOLUTION : 2
	CALCUATION OF DEPLETION EXPENSES FOR THE CURRENT YEAR
	Year		No. of Tons Produced	X	Rate Per Ton	=	Depletion Expenses
	Depletion Expenses =		2,01,50,000	X	$                1.60	=	$      3,22,40,000
Answer = Depletion Expenses = $ 32,240,000
SOLUTION : 3
Date	Account Title	Debit	Credit
Dec.31	Depletion Expenses	$3,22,40,000
	Accumulated Depletion - Mineral Rights		$3,22,40,000
	(To Record the depreciation expenses for the year)