Exercise 10-18 Depletion of natural resources L.O. P1, P3 On April 2, 2011, Idah

Question

Exercise 10-18 Depletion of natural resources L.O. P1, P3 On April 2, 2011, Idaho Mining Co. pays $4,874,350 for an ore deposit containing 1,541,000 tons. The company installs machinery in the mine costing $152,600, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Idaho begins mining on May 1, 2011, and mines and sells 141,300 tons of ore during the remaining eight months of 2011. Prepare the December 31, 2011, entries to record the ore deposit depletion and then the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine's depletion. (Do not round intermediate calculations. Round your final answers to the nearest whole number. Omit the "$" sign in your response.)

Prepare the December 31, 2011, entries to record the ore deposit depletion and then the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine

Explanation / Answer

First we ll calculate Depriciation Rate that ll be

Depriciation Rate = ($152,600/7) = $218000 per year

Since it is given that machinery was used for only 8 months hence

Net Depreciation ll be = 218000 * (8/12) = $14533.33

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