Question

Alaska Mining Co. acquired mineral rights for $37,878,000. The mineral deposit is estimated at 21,400,000 tons. During the current year, 2,150,000 tons were mined and solda. Determine the amount of depletion expense for the current year. Round the depletion rate to two decimals places.b. Journalize the adjusting entry on December 31 to recognize the depletion expense.

Answer 1

The depletion expense for Alaska Mining Co. is $3,805,500 for the current year and is calculated by finding the depletion rate ($1.77 per ton) and multiplying it by the amount of minerals extracted. The journal entry to record the depletion expense debits Depletion Expense and credits Accumulated Depletion for the calculated amount.

Step-by-step explanation:

The student asked to determine the amount of depletion expense Alaska Mining Co. would record for the year when 2,150,000 tons of mineral were mined and sold, given that the total mineral deposit is estimated at 21,400,000 tons and was acquired for $37,878,000. To calculate the depletion expense, you first find the depletion rate per ton by dividing the total cost by the total estimated tonnage of the minerals ($37,878,000 / 21,400,000 tons), and then multiply the rate by the amount of mineral extracted during the year.

Depletion rate per ton = $37,878,000 / 21,400,000 tons = $1.77 per ton (rounded to two decimal places)

Depletion expense for current year = $1.77 per ton * 2,150,000 tons = $3,805,500

The journal entry to recognize the depletion expense would be:

Debit Depletion Expense $3,805,500

Credit Accumulated Depletion $3,805,500