QS 8-10 Natural resources and depletion LO P3 Perez Company acquires an ore mine

Question

QS 8-10 Natural resources and depletion LO P3 Perez Company acquires an ore mine at a cost of $1,400,000. It incurs additional costs of $400,000 to access the mine, which is estimated to hold 1,000,000 tons of ore. 180,000 tons of ore are mined and sold the first year. The estimated value of the land aftert ore is removed is $200,000. Calculate the depletion expense from the information given. (Round "Depletion per unit" to two decinm places.) Cost Salvage Amount subject to depletion Total units of capacity Depletion per unit Units extracted and sold in period Depletion expense

Explanation / Answer

1) Calculate following :

Journal entry

Cost (1400000+400000) 1800000 Salvage value 200000 Amount subject to depletion 1600000 Total units of capacity 1000000 Depletion per unit 1.6 per unit Units extracted and sold in period 180000 Depletion expense 288000

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