Question

On July 1, 2019, Friedman Inc. invested $720,000 in a mine estimated to have 900,000 tons of ore of uniform grade. During the last 6 months of 2019, 100,000 tons of ore were mined.

Required:


1) Calculate depletion cost per unit.


2) Prepare the journal to record depletion.

Answer 1

A.$0.8

B.Dr Depletion account 80,000

Cr Coal mine Asset 80,000

Step-by-step explanation:

Friedman Inc

A.

Depletion cost per unit = Amount invested / Estimated tons of ore

$720,000/900,000

=$0.8

B.

Journal entry

Dr Depletion account 80,000

Cr Coal mine Asset 80,000

Total depletion of ore = Number of ore ×Depletion cost per unit

=$0.8*100,000

=80,000