Answer:
The answer is b. Debit to Inventory for $275,400.
Explanation:
We have Depletion base is calculated as:
Acquisition cost + Development cost + Restoration cost - Disposal price = 1,500,000 + 360,000 + 180,000 - 510,000 = $1,530,000
=> Depletion rate per one ton of extracted coal = 1,530,000/5,000 = $306
Amount of Depletion recorded in first year with 900 tons extracted = 306 x 900 = $275,400; which will be recorded in the first year as:
Dr Inventory - coal extracted 275,400
Cr Accumulated Depletion 275,400
=> Thus, (b) Debit to Inventory for $275,400 is the correct choice.
