Alaska Mining Co. acquired mineral rights for $67,500,000. The mineral deposit is estimated at 30,000,000 tons. During the current year, 4,000,000 tons were mined and sold.
a. Determine the amount of depletion expense for the current year.
b. Journalize the adjusting entry on December 31 to recognize the depletion expense.
Answer:
a. $67,500,000 ÷ 30,000,000 tons = $2.25 depletion per ton
4,000,000 tons × $2.25 = $9,000,000 depletion expense
b. Dec. 31 Depletion Expense9,000,000
Accumulated Depletion9,000,000
Depletion of mineral deposit.