On April 2, 2011, Idaho Mining Co. pays $3,633,750 for an ore deposit containing
ID: 2385298 • Letter: O
Question
On April 2, 2011, Idaho Mining Co. pays $3,633,750 for an ore deposit containing 1,425,000 tons. The company installs machinery in the mine costing $171,000, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Idaho begins mining on May 1, 2011, and mines and sells 156,200 tons of ore during the remaining eight months of 2011.
Prepare the December 31, 2011, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine’s depletion. (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
On April 2, 2011, Idaho Mining Co. pays $3,633,750 for an ore deposit containing 1,425,000 tons. The company installs machinery in the mine costing $171,000, 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 156,200 tons of ore during the remaining eight months of 2011.
Explanation / Answer
DR Depletion expense 156,200 CR Ore deposit 156,200 Monthly depreciation = 171,000 / (7*12) = 2,036.71 April 2 - Dec31: 2,036*9 = 18,321 DR Depreciation expense - Machinery 18,321 Cr Accumulated depreciation - Machinery 18,321
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