Answer:
a. Determine the amount of depletion expense for the current year.
To find the depletion expense, we use the following formula:
Depletion
Expense = ( Cost - Salvage value / estimated n of units) x n of units extracted
Because we are not given any salvage value in the question, we will assume the salvage value is 0.
Plug the amounts into the formula to find the answer:
Depletion
Expense = (67,500,000 - 0 / 30,000,000) x 4,000,000
= 9,000,000
b. Journalize the adjusting entry on December 31 to recognize the depletion expense.
Account Debit Credit
Depletion Expense $9,000,000
Accumulated Depletion $9,000,000
