Question

1. Solare Company acquired mineral rights for $60,000,000.  The diamond deposit is estimated at 6,000,000 tons.  During the current year, 2,300,000 were mined and sold.

   a.	Determine the depletion rate.
   b.	Determine the amount of depletion expense for the current year.
   c.	Journalize the adjusting entry to recognize the depletion expens

Answer 1

a.
Determine the depletion rate
$60,000,000 / 6,000,000 = $10 per ton

b.
Determine the amount of depletion expense for the current year.
10 x 2,300,000 = $23,000,000 Depletion expense

c.
Journalize the adjusting entry to recognize the depletion expense.
Dr Depletion Expense 23,000,000
Cr Accumulated Depletion 23,000,000