Perez Company acquires an ore mine at a cost of $1,540,000. It incurs additional

Question

Perez Company acquires an ore mine at a cost of $1,540,000. It incurs additional costs of $431,200 to access the mine, which is estimated to hold 1,100,000 tons of ore. 185,000 tons of ore are mined and sold the first year. The estimated value of the land after the ore is removed is $220,000. Calculate the depletion expense from the information given. (Round "Depletion per unit" to 3 decimal places.)

Prepare the entry to record the cost of the ore mine and year-end adjusting entry.

Record the cost of the ore mine in cash

record the year-end adjusting entry for the depletion expense of ore mine

Perez Company acquires an ore mine at a cost of $1,540,000. It incurs additional costs of $431,200 to access the mine, which is estimated to hold 1,100,000 tons of ore. 185,000 tons of ore are mined and sold the first year. The estimated value of the land after the ore is removed is $220,000. Calculate the depletion expense from the information given. (Round "Depletion per unit" to 3 decimal places.)

cost salvage amount subject to depletion total units of capacity depletion per unit units extracted and sold in period depletion expense

Prepare the entry to record the cost of the ore mine and year-end adjusting entry.

Record the cost of the ore mine in cash

record the year-end adjusting entry for the depletion expense of ore mine

Explanation / Answer

Calculate depletion expense ::

Prepare the entry to record the cost of the ore mine and year-end adjusting entry.

Cost 1971200 Salvage value 220000 amount subject to depletion 1751200 total units of capacity 1100000 depletion per unit (1751200/1100000) 1.592 units extracted and sold in period 185000 depletion expense (1.592*185000) 294520

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