Natural Resources The Stein Company acquires a copper mine at the cost of $950,000 on January 1. Along with the purchase price Stein pays additional costs associated with development of $75,000. Stein expects the mine will have a salvage value of $125,000 once all the copper has been mined. Best estimates are that the mine contains 300,000 tons of ore. Required a. Prepare the entry to record the purchase of the copper mine. b. Prepare the December 31 year-end adjusting entry to record depletion is 40,000 tons of ore are mined and all the ore is sold. c. Prepare the December 31 year-end adjusting entry to record depletion if 40,000 tons of ore are mined but only 10,000 tons of the ore are sold. Description Debit Credit a. Purchase of Copper mine b. To record depletion on Copper mine. c. Copper inventory To record depletion on Copper mine.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Natural Resources
The Stein Company acquires a copper mine at the cost of $950,000 on January 1. Along with the purchase price Stein pays additional costs associated with development of $75,000. Stein expects the mine will have a salvage value of $125,000 once all the copper has been mined. Best estimates are that the mine contains 300,000 tons of ore.
Required
a. Prepare the entry to record the purchase of the copper mine.
b. Prepare the December 31 year-end
c. Prepare the December 31 year-end adjusting entry to record depletion if 40,000 tons of ore are mined but only 10,000 tons of the ore are sold.
| Description | Debit | Credit | ||
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Purchase of Copper mine |
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| b. |
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To record depletion on Copper mine. |
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| c. | Copper inventory |
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To record depletion on Copper mine. |
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