Big Sky Mining Co. acquired mineral rights for $42,000,000. The mineral deposit
ID: 2714011 • Letter: B
Question
Big Sky Mining Co. acquired mineral rights for $42,000,000. The mineral deposit is estimated at 20,000,000 tons. During the current year, 1,850,000 tons were mined and sold.
A. Determine the amount of depletion expense for the current year.
$???????
B. Journalize the adjusting entry to recognize the depletion expense.
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.Explanation / Answer
Depletion Expense = Cost of Mineral rights * Number of units mined / Estimated number of units
= 42000000 * 1850000 / 20000000
= 3885000
Depletion Expense A/c Dr. 3885000
To Coal Mine assets A/c 3885000
(Depletion expense recorded)
Note:- The figures are in $.
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