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Depletion Entries Alaska Mining Co. acquired mineral rights for $67,500,000. The mineral deposit is estimated at 30,000,000 tons. During the current year, 4,000,000 tons were mined and sold. a. Determine the amount of depletion expense for the current year. Round the depletion rate to two decimals places. $ b. Journalize the adjusting entry on December 31 to recognize the depletion expense. Dec. 31

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Answer:

a. $ 9,000,000

b.

Depletion Expense $ 9,000,000  (debit)

Accumulated Depletion  $ 9,000,000 (credit)

Explanation:

The depletion expense is calculated using the formula :

Depletion expense = Cost of Asset / Estimated total contents in units × Number of units taken in the period

                                =  $67,500,000 / 30,000,000 tons × 4,000,000 tons

                                = $ 9,000,000

The entry to recognize the depletion expense will be :

Depletion Expense $ 9,000,000  (debit)

Accumulated Depletion  $ 9,000,000 (credit)

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