QS 8-10 Natural resources and depletion LO P3 Perez Company acquires an ore mine

Question

QS 8-10 Natural resources and depletion LO P3 Perez Company acquires an ore mine at a cost of $1,680,000. It incurs additional costs of $470,400 to access the mine, which is estimated to hold 1,200,000 tons of ore. 190,000 tons of ore are mined and sold the first year. The estimated value of the land after the ore is removed is $240,000. Calculate the depletion expense from the information given. (Round "Depletion per unit" to 3 decimal places.) Answer is not complete Cost Salvage Amount subject to depletion Total units of capacity Depletion per unit Units extracted and sold in period Depletion expense $ 1,680,000 1. & 2. Prepare the entry to record the cost of the ore mine and year-end adjusting entry Answer is not complete Transaction General Journal Debit Credit Depletion expense-Ore mine Cash Depletion expense-Ore mine Accumulated depletion-Ore mine

Explanation / Answer

1) calculate following :

Journal entry :

Cost (1680000+470400) 2150400 Salvage 240000 Amount Subject to depletion 1910400 Total unit of capacity 1200000 Depletion per unit 1.592 Units extracted and sold in period 190000 Depletion expense (1.592*190000) 302480

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