Question

10 On April 2, 2017, Montana Mining Co. pays $3,606,280 for an ore deposit containing 1,496,000 tons. The company installs machinery in the mine costing $186,000, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Montana begins mining on May 1, 2017, and mines and sells 175,400 tons of ore during the remaining eight months of 2017 Prepare the December 31, 2017, entries to record both the ore deposit depletion and the mining machinery deprecilation. Mining machinery depreciation should be in proportion to the mine's depletion. (Do not round intermediate calculations. Round your final answers to the nearest whole number.) Hint Journal entry worksheet Record the year-end adjusting entry for the depletion expense of ore ine < Prev 10of 10 Next > 23

Answer 1

Given in the problem that
Deposite amount :-$ 3,606,280 containing 1,496,000 Tonnes
and purchase of machinary of value :- $ 1,86,000
Sales in no of tonnes 1,75,400
Calculation of depletion of deposite
Total values of deposite $ 3,606,280 for the land of 1,496,000 tonnes
and for the value of sales made of 175,400
	3606280/1496000*175400			422821.9
Journal Entry for depletion of deposite os
Depletion in deposite for land A/C …………………….Dr					4,22,822.00
Deposite A/C						4,22,822.00
Given depreciation is calculated on the basis of proportionate to mining depletion
% of mining depletion =175,400/1,496,000				0.117246
Hence depreciation =value of asset * % of depreciation
	186,000*.117246		21807.76
Depreciation A/C ………………………………Dr					21,808.00
To Machinary A/C						21,808.00