Big Sky Mining Co. acquired mineral rights for $34,768,000. The mineral deposit

Question

Big Sky Mining Co. acquired mineral rights for $34,768,000. The mineral deposit is estimated at 16,400,000 tons. During the current year, 2,180,000 tons were mined and sold. Required A. Determine the amount of depletion expense for the current year. B. Journalize the adjusting entry to recognize the depletion expense. Refer to the Chart of Accounts for exact wording of account titles. (Note: The company makes all adjusting entries on December 31.) Starting question A. Determine the amount of depletion expense for the current year.

Explanation / Answer

A) Depletion expenses = (34768000/16400000)*21800000 = 4621600

B) Journal entry :

Date accounts & explanation debit credit Depletion expenses a/c 4621600 Accumlated depletion expenses a/c 4621600 (To record depletion expenses)

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