On April 2, 2011, Idaho Mining Co. pays $3,506,670 for an ore deposit containing

Question

On April 2, 2011, Idaho Mining Co. pays $3,506,670 for an ore deposit containing 1,417,000 tons. The company installs machinery in the mine costing $199,400, 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 137,400 tons of ore during the remaining eight months of 2011.

Prepare the December 31, 2011, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine%u2019s depletion. (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

On April 2, 2011, Idaho Mining Co. pays $3,506,670 for an ore deposit containing 1,417,000 tons. The company installs machinery in the mine costing $199,400, 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 137,400 tons of ore during the remaining eight months of 2011.

Explanation / Answer

Hi,

Please find the answer as follows:

Depletion expense Dr (137400/1417000*3506670) 340026
Accumulated depletion Cr 340026

Depreciation expense Dr (137400/1417000*199400) 19335
Accumulated depreciation Cr 19335

Thanks.

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