Computing and recording depletion expense
Ecru Sand and Gravel paid $600,000 to acquire 800,000 cubic yards of sand reserves. The following statements model reflects Ecru’s financial condition just prior to purchasing the sand reserves. The company extracted 420,000 cubic yards of sand in year 1 and 360,000 cubic yards in year 2.
Required
a.Compute the depletion charge per unit.
b. Record the acquisition of the sand reserves and the depletion expense for years 1 and 2 in a financial statements model like the preceding one.
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