Answer:
Part a
Debit : Silver Mine $1,650,000
Credit : Cash $1,650,000
Part b
Debit : Depletion expense $354,000
Credit : Accumulated depletion $354,000
Part c
Debit : Depletion expense $354,000
Credit : Accumulated depletion $354,000
Explanation:
Step 1 : Cost of the Silver Mine
Purchase Price $1,600,000
Development Costs $50,000
Total Cost $1,650,000
Step 2 : Depletion rate
Depletion rate = (Cost - Salvage value) ÷ Estimate Usage
= $5.90
Step 3 : Depletion expense
<em>Note : Depletion expense depends on units mined only instead of units sold.</em>
Depletion expense = Depletion rate x Units mined
<u>if 60,000 tons of ore are mined and sold :</u>
Depletion expense = $354,000
<u>if 60,000 tons of ore are mined but only 15,000 tons of the ore are sold :</u>
Depletion expense = $354,000