Question

Skysong, Inc. purchased for $9.4599 million a mine that is estimated to have 41.13 million tons of ore and no salvage value. In the first year, 12.02 million tons of ore are extracted. Calculate depletion cost per unit. (Round answer to 2 decimal places, e.g. 0.50.) Depletion cost per unit. per ton SHOW LIST OF ACCOUNTS Prepare the journal entry to record depletion for the first year. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit Depletion Expense Ore Mine SHOW LIST OF ACCOUNTS Show how this mine is reported on the balance sheet at the end of the first year. Skysong, Inc. Balance Sheet (Partial) $ $

Answer 1

Depletion cost per unit = Cost of mine/Estimated tons

= 9,459,900/41,130,000

= $0.23 per ton

Ore are extracted in year 1 = 12020000 tons

Depletion cost for the year 1 = ore extracted x Depletion cost per unit

= 12020000 x 0.23

= $2,764,600

Journal

Account Titles and Explanation	Debit	Credit
Depletion expense	$2,764,600
Accumulated depletion - ore mine		$2,764,600

Skysong, Inc.
Balance Sheet ( Partial)
Ore mine	9,459,900
Less: Accumulated depletion	-2,764,600	$6,695,300

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