Question

Additional Exercise 262 On July 1, 2018, Melton Inc. Invested $560,000 in a mine estimated to have 800,000 tons of ore of uniform grade. During the last 6 months of 2018, 100,000 tons of ore were mined and sold. Calculate depletion cost per unit. (Round answer to 2 decimal places, e.g. 0.50.) Depletion cost per unit Prepare the journal entry to record depletion. (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.) Date Account Titles and Explanation Debit Credit Dec. 31

Answer 1

Depletion Cost per unit = ( Depletion Base - Salvage Value ) / Expected unit to be Extracted

Depletion Base = $ 560,000

Expected Unit to be extracted = 800,000

= (560,000-0) / 800,000 = $ 0.70

Journal Entry on Dec. 31

Depletion Expense A/c Dr. $ 70,000

To Accumulated Depletion A/c   $ 70,000

( Being Depletion expense charge )

Note - 1. Salvage value is taken zero since no salvage value provided in the question .

2. All amount are in $.