Alaska Mining Co. acquired mineral rights for $37,878,000. The mineral deposit is estimated at 21,400,000 tons. During the current year, 2,150,000 tons were mined and solda. Determine the amount of depletion expense for the current year. Round the depletion rate to two decimals places. b. Journalize the adjusting entry on December 31 to recognize the depletion expense.

Question

Cornelius Patrick

Business

27 August, 15:22

Alaska Mining Co. acquired mineral rights for $37,878,000. The mineral deposit is estimated at 21,400,000 tons. During the current year, 2,150,000 tons were mined and solda. Determine the amount of depletion expense for the current year. Round the depletion rate to two decimals places. b. Journalize the adjusting entry on December 31 to recognize the depletion expense.

+4

Answers (1)

Know the Answer?

Porky · Answer 1

a. 3,787,800.00

b. Debit Amortization expense $3,787,800.00

Credits Mining rights (B/S) $3,787,800.00

Being entries to recognize depletion expense for the period.

Explanation:

The depletion expense represents the dollar equivalent of the mineral right that has been mined during a given period of time.

Therefore, given;

Deposits = 21,400,000 tons

Quantity mined during the period = 2,150,000 tons

Cost of rights acquisition = $37,878,000

Depletion expense = (2,150,000 tons/21,400,000 tons) * $37,878,000

= $3,787,800.00 (with the depletion rate rounded to two decimals places)

Debit Amortization expense $3,787,800.00

Credits Mining rights (B/S) $3,787,800.00

Being entries to recognize depletion expense for the period.