Everly Corporation acquires a coal mine at a cost of $538,800. Intangible develo

Question

Everly Corporation acquires a coal mine at a cost of $538,800. Intangible development costs total $134,700. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $107,760), after which it can be sold for $215,520. Everly estimates that 5,388 tons of coal can be extracted.

If 943 tons are extracted the first year, prepare the journal entry to record depletion. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Total Cost Acquiring Cost 538800 Development Cost 134700 Total 673500 Depletion Expense = (Cost- Salvage)* Estimated no of units extracted/ Total No of units Net salvage Value = 215520-107760 $107,760 Depletion Expense = (673500-107760)*943/5388 99015 Journal Entry Depletion Expense Dr 99015 To Coal Mine 99015

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