Question

Determine the amount of depletion expense that would be recognized on the Year 1 income statement for each of the two reserves, assuming 14,800 tons of silver were mined and 510,000 board feet of lumber were cut. Determine the amount of depletion expense that would be recognized on the Year 2 income statement for each of the four reserves, assuming 29,000 tons of silver are mined, 370,000 board feet of lumber are cut, 4,200 tons of gold ore are mined, and 83,000 barrels of oil are extracted. Prepare the portion of the December 31, Year 2, balance sheet that reports natural resources.

Answer 1

Answer:

Kindly check the explanation section.

Explanation:

STEP ONE: calculate or Determine the depletion expense per unit. .

For oil reserves, the depletion expense = 1376000 - 0/ 257000 - 12000 = $5.76.

For timber, the depletion expense = 2080000 - 112000/ 1770000 = $1.11.

For silver mine, the depletion expense = 1840000 - 0/ 131000 = $14.05.

For Gold mine, the depletion expense = 3070000 - 0/63000 = $48.73.

STEP TWO : Determine or calculate the total depletion expense.

For the year 2018, the total depletion expense for; (a). silver mine= 14.05 × 14800 = $ 207,940.

(b). Timber = 1.11 × 51000 = $566100.

For 2019, the the total depletion expense for; (a). silver mine= 14.05 × 29000 = 407,450

(b). Timber = 1.11 × 370,000 = 410,700.

(c). Gold mine = 48.73 × 4200 = 204,666.

(d). Oil reserve = 5.76 × 83,000 = 478,080.

STEP THREE:

SILVER MINE: 1840000

- Accumulated depletion = ($ 407,450 + $ 207,940) = 615,390.

(1). Thus, 1840000 - 615,390 = 1,224,610.

GOLD MINE = 3070000.

Accumulated depletion = 204,666.

(2). Therefore, we have 3070000 - 204666 = 2,865,334.

TIMBER: 2080000.

Accumulated depletion = ( $566100 + 410,700) = 976,800.

Residual value of land = #112000.

(3). Therefore, (2080000 - 976,800) - 112,000 = 991,200.

OIL RESERVES: 1376000.

Accumulated depletion= 478,080.

(4). Therefore, 1376000 - 478,080 = 897,920.

Hence, we have the total natural resources = (1) + (2). + (3). + (4). =

1,224,610 + 2,865,334 + 991,200 + 897,920 = $ 5,979,064.

Therefore, 5,979,064 - 112,000 = $ 5,867,064.