Billings Corporation acquires a coal mine at a cost of $2,000,000. Intangible development costs total $275,000. After extraction has occurred, Billings must restore the property (estimated fair value of the obligation is $305,000), after which it can be sold for $750,000. Billings estimates that 5,000 tons of coal can be extracted. If 900 tons are extracted the first year, which of the following would be included in the journal entry to record depletion? a.) Debit to Inventory for $329,400 b.) Credit to Accumulated Depletion for $1,500,600 c.) Debit to Accumulated Depletion for $329,400 d.) Credit to Inventory for $135,000
Billings Corporation acquires a coal mine at a cost of $2,000,000. Intangible development costs total $275,000. After extraction has occurred, Billings must restore the property (estimated fair value of the obligation is $305,000), after which it can be sold for $750,000. Billings estimates that 5,000 tons of coal can be extracted. If 900 tons are extracted the first year, which of the following would be included in the journal entry to record depletion? a.) Debit to Inventory for $329,400 b.) Credit to Accumulated Depletion for $1,500,600 c.) Debit to Accumulated Depletion for $329,400 d.) Credit to Inventory for $135,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Billings Corporation acquires a coal mine at a cost of $2,000,000. Intangible development costs total $275,000. After extraction has occurred, Billings must restore the property (estimated fair value of the obligation is $305,000), after which it can be sold for $750,000. Billings estimates that 5,000 tons of coal can be extracted. If 900 tons are extracted the first year, which of the following would be included in the
a.) Debit to Inventory for $329,400
b.) Credit to Accumulated Depletion for $1,500,600
c.) Debit to Accumulated Depletion for $329,400
d.) Credit to Inventory for $135,000
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