Question

Concord Corporation acquires a coal mine at a cost of $1590000. Intangible development costs total $365000. After extraction has occurred, Concord must restore the property (estimated fair value of the obligation is $178000), after which it can be sold for $508000. Concord estimates that 6000 tons of coal can be extracted. If 900 tons are extracted the first year, which of the following would be included in the journal entry to record depletion? (Round intermediate calculations to 2 decimal places, e.g. 20.25 and final answer to nearest dollar amount, eg. 102456.)

a. Credit to Accumulated Depletion for $396150
b. Credit to Inventory for $238500
c. Debit to Accumulated Depletion for $243747
d. Debit to Inventory for $243747

Answer 1

Depletion cost per ton = (1590000+365000+178000-508000)/6000

Depletion cost per ton = $270.83

Depletion cost = $270.83*900 tons

Depletion cost = 243,747

Account Titles Debit Credit

Depletion Expenses $243,747

Accumulated depletion $243,747