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kolezko [41]
3 years ago
14

Alaska Mining Co. acquired mineral rights for $67,500,000. The mineral deposit is estimated at 30,000,000 tons. During the curre

nt year, 4,000,000 tons were mined and sold. Required: a. Determine the amount of depletion expense for the current year. b. Journalize the adjusting entry on December 31 to recognize the depletion expense. Refer to the Chart of Accounts for exact wording of account titles.
Business
1 answer:
Reil [10]3 years ago
3 0

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

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Answer: $828

Explanation:

Given the following :

Semi-annual payment = $40

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Using the PV table:

PV at $1 (40, 5%) = 0.1420

PVA at $1 (40, 5%) = 17.159

[Par value * PV at $1 (40, 5%)] + [$40 * PVA at $1 (40, 5%)]

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3 years ago
An investor has $50,000 in cash to put a $5,000 down payment on 10 different homes valued at $50,000 each and will finance the r
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3 years ago
A liquid company produces hand sanitizer which has demand of 300,000 units per year.
jarptica [38.1K]

Answer:

EOQ =   =  15,491.93 units

Optimal order interval   18.8 days   (19.36  orders in year)

Total cost = $150,774.60

Explanation:

<em>The Economic Order Quantity (EOQ) is the order size that minimizes the balance of ordering cost and holding cost. At the EOQ, the carrying cost is equal to the holding cost.</em>

It is computed using he formulae below

EOQ = √ (2× Co× D)/Ch

<em>Co- ordering cost per order- 20, </em>

<em>Ch -Holding cost per unit per annum- 10%× $0.5=  0.05</em>

<em>Annual demand: D- 300,000</em>

EOQ = √(2× 20 * 2,580)/(10%× 0.5)

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Assuming 365 days, the optimal order interval in dates

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<u><em>in days:</em></u>

= EOQ/300,000 × 365 days

=   (15,491.93/ 300,000) × 365 days

= 18.8 days

Total annual cost =

<em>Total cost Purchase cost + Carrying cost + ordering cost </em>

                                                                                 $

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Ordering cost = (300,000/15,491.93 ) × 20 = <u>387.29</u>

Total cost                                                      1<u>50,774.60</u><u> </u>

       

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