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.
Required:
Wrie the necessary adjusting journal entry to record depletion expense.

Answer 1

Answer: See explanation

Explanation:

Following the information given in the question, the adjusting journal entry to record depletion expense will be:

Debit Depletion expense - Coal deposit = $280,000

Credit Accumulated Depletion - Coal Deposit = $280,000

Note that the depletion expense was calculated as:

= ($900000 - $100000) / 200000] × 70000

= $280000