Question

Coronado Ltd. acquired the rights to use 2.200 hectares of land in northern Alberta to mine for uranium. The cost of the land was $122,000, exploration costs were $216,000, and the development costs incurred were $533,250. All of these costs were capitalized. The company estimated that the mine would produce about 205,000 ounces of uranium. In the first year, 25,900 ounces were extracted from the mine, of which 10,100 were sold. Assume all purchases were cash. Prepare the journal entries on the books of Coronado Ltd. to record the purchase and capitalization of the mine. (Credit account tities are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit eTextbook and Media List of Accounts Prepare the journal entry on the books of Coronado Ltd. to record depletion costs for the first year. (Round per unit cost to 2 decimal places e.. 5.75 and final answers to O decimal places, e-s. 5.275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account tities and enter for the amounts.) Account Titles and Explanation Debit Credit e Textbook and Media List of Accounts Prepare the journal entry on the books of Coronado Ltd. to record the cost of uranium sold for the first year. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts) Account Titles and Explanation Debit Credit

Answer 1

Answer

1.

Total Cost = Cost of Land + Exploration cost + Development cost

= $122,000 + 216,000 + 533,250

Total Cost = $871,250

Depletion Expense

As there is some still stock left so we will only record which is sold and unsold will be recorded as Inventory not depletion

Cost per ounce of Uranium = Total Cost / Estimated production

= $871,250 / 205,000

= $4.25 per ounce

Depletion Expense = Sold * Rate per ounce

= 10,100 * 4.25

= $42,925

S No.	Particulars	Debit	Credit
1	Uranium Deposits	871,250.00
	Cash		871,250.00
2	Depletion (Note)	42,925.00
	Accumulated Depletion - Uranium Deposits		42,925.00
3	Cost of Goods Sold	42,925.00
	Depletion		42,925.00

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