Exercise 10-18 Depletion of natural resources LO P1, P3 On April 2, 2017, Montan

Question

Exercise 10-18 Depletion of natural resources LO P1, P3

On April 2, 2017, Montana Mining Co. pays $4,348,140 for an ore deposit containing 1,400,000 tons. The company installs machinery in the mine costing $234,400, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Montana begins mining on May 1, 2017, and mines and sells 167,400 tons of ore during the remaining eight months of 2017.
  
Prepare the December 31, 2017, 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. (Do not round intermediate calculations. Round your final answers to the nearest whole number.)

*these are the options:

Accumulated amortization

·       Accumulated depletion—Mineral deposit

·       Accumulated depreciation—Machinery

·       Amortization expense

·       Building

·       Cash

·       Depletion expense—Mineral deposit

·       Depreciation expense—Machinery

·       Equipment

·       Gain on sale of equipment

·       Goodwill

·       Impairment loss

·       Land

·       Land improvements

·       Leasehold improvements

·       Loss from fire

·       Loss on disposal of equipment

·       Loss on exchange of assets

·       Loss on sale of equipment

·       Machinery

·       Mineral deposit

·       Ore mine

·       Prepaid rent

·       Rent expense

·       Repairs expense

·       vehicles

Journal entry worksheet 2 Record the year-end adjusting entry for the depletion expense of ore mine. Note: Enter debits before credits Date General Journal Debit Credit Dec 31 Record entry Clear entry View general journal

Explanation / Answer

Dec-31 Depletion expense—Mineral deposit 519913 =4348140/1400000*167400           Accumulated depletion—Mineral deposit 519913 Dec-31 Depreciation expense—Machinery 22540 =234400/1406000*135200          Accumulated depreciation—Machinery 22540

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