Computing and Recording Depletion Expense In 2016, Eldenburg Mining Company purchased land for $3,600,000 that...
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Accounting
Computing and Recording Depletion Expense
In 2016, Eldenburg Mining Company purchased land for $3,600,000 that had a natural resource reserve estimated to be 500,000 tons. Development and road construction costs on the land were $210,000, and a building was constructed at a cost of $25,000. When the natural resources are completely extracted, the land has an estimated residual value of $600,000. In addition, the cost to restore the property to comply with environmental regulations is estimated to be $400,000. Production in 2016 and 2017 was 60,000 tons and 85,000 tons, respectively.
a. Compute the depletion charge for 2016 and 2017. (You should include depreciation on the building, if any, as part of the depletion charge.) (Do not round the depletion rate.)
2016 $Answer
2017 $Answer
b. Prepare a journal entry to record each year's depletion expense as determined in part a.
General Journal
Date
Description
Debit
Credit
2016
Answer
Answer
Answer
Answer
Answer
Answer
2017
Answer
Answer
Answer
Answer
Answer
Answer
Answer & Explanation
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