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 $3,286,390 for an ore deposit containing 1,441,000 tons. The company installs machinery in the mine costing $242,500, 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 145,800 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.) View transaction list Record the year-end adjusting entry for the depletion expense of ore mine. 1 mine Record the year-end adjusting entry for the depreciation expense of the mining machinery. 2 redit

Explanation / Answer

   The adjusting entry for beginning inventory when a periodic inventory system is used: General Journal Debit Credit Dec-31 Depletion expense—Mineral deposit 3,32,516 =3286390/1441000*145800 Accumulated depletion—Mineral deposit 3,32,516 Dec-31 Depreciation expense—Machinery 24,536 =242500/1441000*145800 Accumulated depreciation—Machinery 24,536

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