Intra-Spect Mining Co. acquired mineral rights for $119,000,000. The mineral deposit is estimated at 85,000,000 tons. During the current year, 25,500,000 tons were mined and sold.

Question

Question Content Area
a. Determine the depletion rate. If required, round your answer to two decimal places.
fill in the blank 1 of 1$
per ton

b. Determine the amount of depletion expense for the current year.
fill in the blank 1 of 1$

Question Content Area
c. Journalize the adjusting entry on December 31 to recognize the depletion expense. If an amount box does not require an entry, leave it blank.

DateAccountDebitCredit
December 31

Answer 1

To calculate depletion expense for Intra-Spect Mining Co., follow these steps:

a. Determine the depletion rate:

1. Depletion Rate = Cost of mineral rights / Total estimated tons \[ \text{Depletion Rate} = \frac{119,000,000}{85,000,000} = 1.4 , \text{dollars per ton} \]

So, the depletion rate is $1.40 per ton.

b. Determine the amount of depletion expense for the current year:

2. Depletion Expense = Depletion Rate × Tons mined and sold \[ \text{Depletion Expense} = 1.4 \times 25,500,000 = 35,700,000 , \text{dollars} \]

So, the depletion expense for the current year is $35,700,000.

c. Journalize the adjusting entry on December 31 to recognize the depletion expense:

The journal entry would look like this:

| Date | Account | Debit | Credit | |--------------|-----------------------------|----------------|-----------------| | December 31 | Depletion Expense | 35,700,000 | | | | Accumulated Depletion | | 35,700,000 |

This entry recognizes the depletion expense on the income statement and increases the accumulated depletion account on the balance sheet.

Summary:

• a. Depletion Rate: $1.40 per ton
• b. Depletion Expense: $35,700,000
• c. Journal Entry:
  • Debit: Depletion Expense $35,700,000
  • Credit: Accumulated Depletion $35,700,000