Question

Last year, Mountain Top, Inc., purchased a coal mine at a cost of $900,000. The salvage value has been estimated at $100,000. The coal mine has an estimated 200,000 tons of available coal. A total of 70,000 tons were mined and sold during the current year. Complete the necessary adjusting journal entry to record depletion expense for the current year by selecting the account names from the drop-down menus and entering the dollar amounts in the debitor credit columns Answer is complete but not entirely correct. No Date General Journal Credit Debit 100,000 Dec 31 Depletion expense Accumulated depreciation 70,000

Answer 1

Answer:

                       Journal entry

Date          Description                        Debit                  Credit

                Depletion expenses           $280,000

                 Accumulated Depletion                               $280,000  

Explanation:

To determin the depletion expenses, calculate the depletion per ton of coal using producing unit  = (cost - salvage value)/ estimated unit

                                    =  ($900,000  -  $100,000)/200,000

                                    =  $4/ton

Depletion expenses = $4 x 70,000  = $280,000