Answer:
a. Depletion rate = $2.25
b. Account Debit($) Credit($)
Depletion expense 9,000,000
Accumulated depletion expense 9,000,000
<u>Being depletion expense for the year.</u>
Explanation:
Depletion expense refers to the loss in value of a long term asset due to reduction in producing capacity of the asset. The depletion is recognized as an expense in the income statement of the relevant year.
To determine depletion expense, depletion rate is needed which can be derived by dividing the total value of the asset net of its residual value (if any) by the total producing capacity of the asset.After this, the depletion rate is used to multiply the production units of the current year.
Here is the formula for depletion rate:
a. Depletion rate = Total value of the asset - residual value
Total production capacity
Here is the formula for depletion expense
b. Depletion expense = Depletion rate x current year production units
a. Depletion rate = $67,500,000
30,000,000
Depletion rate = $2.25
b. Depletion expense = $2.25 x 4,000,000
= $9,000,000
Note: Accumulated depletion expense account is the corresponding account for depletion expense account.
