Question

Hide or show questions Progress:5/5 items eBook Show Me HowCalculator Depletion Hidden Hollow Mining Co. acquired mineral rights for $70,000,000. The mineral deposit is estimated at 70,000,000 tons. During the current year, 18,900,000 tons were mined and sold. a. Determine the depletion rate. If required, round your answer to two decimal places. $ per ton b. Determine the amount of depletion expense for the current year. $ c. Journalize the adjusting entry on December 31 to recognize the depletion expense. Dec. 31

Answer 1

Requirement a

Depletion rate = $1.00 per ton

Working

Units of Production method
A	Cost	$ 70,000,000
B	Residual Value	$ 0
C=A - B	Depreciable base	$ 70,000,000
D	Usage in units(in Tons)	70000000
E	Depreciation per ton	$ 1.00

Requirement b

Depletion expense = $ 18,900,000

Working

Depreciation schedule-Units of Activity
Year	Book Value	Usage	Depletion expense
1	$        70,000,000	18900000	$           18,900,000

Requirement c

Date	Accounts title	Debit	Credit
Dec 31	Depletion expense	$ 18,900,000
	Accumulated Depletion		$ 18,900,000
	(Depletion expense recorded)