On April 2, 2011, Idaho Mining Co. pays $3,506,670 for an ore deposit containing
ID: 2375499 • Letter: O
Question
On April 2, 2011, Idaho Mining Co. pays $3,506,670 for an ore deposit containing 1,417,000 tons. The company installs machinery in the mine costing $199,400, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Idaho begins mining on May 1, 2011, and mines and sells 137,400 tons of ore during the remaining eight months of 2011.
Prepare the December 31, 2011, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine%u2019s depletion.
On April 2, 2011, Idaho Mining Co. pays $3,506,670 for an ore deposit containing 1,417,000 tons. The company installs machinery in the mine costing $199,400, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Idaho begins mining on May 1, 2011, and mines and sells 137,400 tons of ore during the remaining eight months of 2011.
Explanation / Answer
Depletion Rate
$4,190,570 / 1,477,000 tons = $2.84 per ton
Depreciation Rate
$165,300 / 1,477,000 tons = $0.11 per ton
Depletion for 2011
$2.84 x 167,200 tons = $474,848
Depreciation for 2011
$0.11 x 167,200 tons = $18,392
Dr Depletion expense-mineral deposit 474,848
Cr Accumulated depletion-mineral deposit 474,848
Dr Depreciation Expense--Machinery 18,392
Cr Accumulated Depreciation--Machinery 18,392
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