Asked by jesus salazar on May 11, 2024
Verified
Chasteen Company acquired mineral rights for $9,100,000. The mineral deposit is estimated at 65,000,000 tons. During the current year, 18,375,000 tons were mined and sold.?
Required
(a)Determine the amount of depletion expense for the current year.
(b)Journalize the adjusting entry to recognize the depletion expense.
Depletion Expense
The allocation of the cost of natural resources over their useful life, often used in industries like mining, quarrying, or oil extraction.
Mineral Rights
Legal entitlements that grant the holder the ability to mine, extract, or exploit minerals from the land.
Adjusting Entry
Journal entries made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.
- Understand and apply the concept of depletion for natural resources.
Verified Answer
NB
Nicolas BellemareMay 15, 2024
Final Answer :
(a)$9,100,000/65,000,000 tons = $0.14 depletion per ton18,375,000 × $0.14 = $2,572,500 depletion expense
(b)Depletion Expense2,572,500Accumulated Depletion2,572,500Depletion of mineral deposit.
(b)Depletion Expense2,572,500Accumulated Depletion2,572,500Depletion of mineral deposit.
Learning Objectives
- Understand and apply the concept of depletion for natural resources.