Glacier Mining Co. acquired mineral rights for $494,000,000. The mineral deposit

Question

Glacier Mining Co. acquired mineral rights for $494,000,000. The mineral deposit is estimated at 475,000,000 tons. During the current year, 31,500,000 tons were mined and sold. Required: A. Determine the depletion rate. B. Determine the amount of depletion expense for the current year. C. Journalize the adjusting entry on December 31 to recognize the depletion expense. Refer to the Chart of Accounts for exact wording of account titles. Starting Questions A. Determine the depletion rate. $ per ton B. Determine the amount of depletion expense for the current year. $

Explanation / Answer

Cost of Minerals Rights = $ 494,000,000 Minerals deposits = 475,000,000 tonnes' ReqA: Depletion rate Depletion rate = Total cost of Mineral rigts / Minerals Depsoits ( 494,000,000 /475,000,000) = $ 1.04 per tonne ReqB: Amount of Depletion Expense for Current year Minerals mined and extracted = 31,500,000 tonnes Depletion rate = $ 1.04 per tonne Depletion expense for current year = Minerals extracted * depletion rate per tonne ( 31500,000 *1.04 )= $32,760,000 Req C: JOURNAL ENTRY Accounts Title Debt in $ Credit in $ Depletion Expense Dr. 32,760,000 Minerals rights Cr. 32,760,000 (For depletion expense charged from Minerals rights account)

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