On January 1, 2019, PT ABC purchased a coal mine for $1,500,000. The company’s geological surveys show the coal reserve in the mine of 12,500,000 tons. In first quarter (January to March 2020) the company mined and sold 250,000 tons of coal. Instruction: Journalize the depletion cost for the first quarter of 2020.
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.
Fixed asset 3
On January 1, 2019, PT ABC purchased a coal mine for $1,500,000. The company’s geological surveys show the coal reserve in the mine of 12,500,000 tons. In first quarter (January to March 2020) the company mined and sold 250,000 tons of coal.
Instruction: Journalize the depletion cost for the first quarter of 2020.
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