Depletion of natural On April 2, 2015, Montana Mining Co. pays $3,721,000 for an

Question

Depletion of natural

On April 2, 2015, Montana Mining Co. pays $3,721,000 for an ore deposit containing 1,525,000 tons. The company installs machinery in the mine costing $213,500, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Montana begins mining on May 1, 2015, and mines and sells 166,200 tons of ore during the remaining eight months of 2015. Prepare the December 31, 2015, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine's depletion.

Explanation / Answer

Calculation of ore deposit depletion for the year 2015:

Cost of Ore deposit

$        3,721,000

Deposit Capacity (tons)

           1,525,000

Ore Mined during the year (tons)

               166,200

Ore deposit depletion for the year 2015 = 3721000*166200/1525000 =

$            405,528

Cost of Machinery

$            213,500

Depreciation for the year 2015 = 213500*166200/1525000 =

$              23,268

Journal Entries:

Dec. 31, 2015

Accounts Explanation

Debit

Credit

Depletion Expense - Ore Deposit

$            405,528

Accumulated Depletion - Ore Deposit

$ 405,528

(Being Depletion expense recorded)

Depreciation expense- Machine

$              23,268

Accumulated Depreciation- Machine

$    23,268

(Being Depreciation expense recorded)

Calculation of ore deposit depletion for the year 2015:

Cost of Ore deposit

$        3,721,000

Deposit Capacity (tons)

           1,525,000

Ore Mined during the year (tons)

               166,200

Ore deposit depletion for the year 2015 = 3721000*166200/1525000 =

$            405,528

Cost of Machinery

$            213,500

Depreciation for the year 2015 = 213500*166200/1525000 =

$              23,268

Journal Entries:

Dec. 31, 2015

Accounts Explanation

Debit

Credit

Depletion Expense - Ore Deposit

$            405,528

Accumulated Depletion - Ore Deposit

$ 405,528

(Being Depletion expense recorded)

Depreciation expense- Machine

$              23,268

Accumulated Depreciation- Machine

$    23,268

(Being Depreciation expense recorded)

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.