EX 10-19 Depletion entries

Crazy Jim’s Mining Co. acquired mineral rights for $21,750,000. The mineral deposit is estimated at 15,000,000 tons. During the current year, 3,600,000 tons were mined and sold.

a. Determine the amount of depletion expense for the current year.
b. Journalize the adjusting entry to recognize the depletion expense.


Answer:

a. $21,750,000 ÷ 15,000,000 tons = $1.45 depletion per ton
3,600,000 tons × $1.45 = $5,220,000 depletion expense

b.
 Depletion Expense 5,220,000
Accumulated Depletion 5,220,000
Depletion of mineral deposit.