On April 2, 2015, Montana Mining Co. pays $4,327,030 for an ore deposit containi
ID: 2447557 • Letter: O
Question
On April 2, 2015, Montana Mining Co. pays $4,327,030 for an ore deposit containing 1,403,000 tons. The company installs machinery in the mine costing $186,100, 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 165,300 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. (Do not round intermediate calculations. Round your final answers to the nearest whole number.)
Record the year-end adjusting entry for the depletion expense of ore mine.
Record the year-end adjusting entry for the depletion expense of ore mine.
Record the year-end adjusting entry for the depreciation expense of the mining machinery.
On April 2, 2015, Montana Mining Co. pays $4,327,030 for an ore deposit containing 1,403,000 tons. The company installs machinery in the mine costing $186,100, 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 165,300 tons of ore during the remaining eight months of 2015.
Explanation / Answer
Answer :
Calculation of Depletion of Ore
=(165300/1403000)*4,327,030
= 509806
Journal Entry
Delpetion of Ore A/c Dr. 509806
to Accumulated Depletion of Ore A/c 509806
Calculation of Depreciation on machinery (in proportion of mines depletion)
= (165300/1403000)*186100
= 21926
Journal Entry for Depreciation
Depreciation on machinery A/c Dr. 21926
to Accumulated Depreciation on machine 21926
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