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21 July, 10:28

On July 1, 2019, Friedman Inc. invested $720,000 in a mine estimated to have 900,000 tons of ore of uniform grade. During the last 6 months of 2019, 100,000 tons of ore were mined.

Required:

1) Calculate depletion cost per unit.

2) Prepare the journal to record depletion.

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Answers (1)
  1. 21 July, 10:50
    0
    A.$0.8

    B. Dr Depletion account 80,000

    Cr Coal mine Asset 80,000

    Explanation:

    Friedman Inc

    A.

    Depletion cost per unit = Amount invested / Estimated tons of ore

    $720,000/900,000

    =$0.8

    B.

    Journal entry

    Dr Depletion account 80,000

    Cr Coal mine Asset 80,000

    Total depletion of ore = Number of ore * Depletion cost per unit

    =$0.8*100,000

    =80,000
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