Brief Exercise 11-9 Everly Corporation acquires a coal mine at a cost of $756,80

Question

Brief Exercise 11-9

Everly Corporation acquires a coal mine at a cost of $756,800. Intangible development costs total $189,200. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $151,360), after which it can be sold for $302,720. Everly estimates that 7,568 tons of coal can be extracted.

If 1,324 tons are extracted the first year, prepare the journal entry to record depletion. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Depletion per ton =   (756800+189200 - 302720 )/ 7568

                                   = 643280 /7568 = $ 85 per ton

Account title Debit credit Depletion expense 112540 Accumulated depletion      (1324*85) 112540

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