Horngren's Financial & Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780133866292
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Question
Chapter 9, Problem 9.24E
(a)
To determine
Depletion: It refers to the process of proportionately distributing the cost of the extracting natural resources such as coal, mines, and petroleum from the earth to the number of units extracted. The following is the formula to calculate the depletion expense:
To record: the
(b)
To determine
To record: the journal entry for the payment of fees and other costs.
(c)
To determine
To record: the journal entry for the depletion of the first year.
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Required information
[The following information applies to the questions displayed below.]
Last Chance Mine (LCM) purchased a coal deposit for $2,088,450. It estimated it would extract 17,550 tons of coal from
the deposit. LCM mined the coal and sold it, reporting gross receipts of $1.15 million, $4.35 million, and $3.1 million for
years 1 through 3, respectively. During years 1-3, LCM reported net income (loss) from the coal deposit activity in the
amount of ($15,400), $667,500, and $662,500, respectively. In years 1-3, LCM extracted 18,550 tons of coal as follows:
(Leave no answer blank. Enter zero if applicable. Enter your answers in dollars and not in millions of dollars.)
(1) Tons of
Coal
17,550
(2) Basis
$2,088,450
Depletion
(2)/(1) Rate
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Year 2
11,450
Year 3
4,700
c. Using the cost and percentage depletion computations from parts (a) and (b), what is LCM's actual depletion expense for each year?
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5. Usula Corporation's subsidiary Pensive oil drills a well with the intention of extracting oil from a known
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Required information
[The following information applies to the questions displayed below.]
On July 23 of the current year, Dakota Mining Company pays $8,027,760 for land estimated to contain 9,672,000 tons of
recoverable ore. It installs and pays for machinery costing $773,760 on July 25. The company removes and sells 499,500
tons of ore during its first five months of operations ending on December 31. Depreciation of the machinery is in
proportion to the mine's depletion as the machinery will be abandoned after the ore is mined.
Required:
Prepare entries to record the following.
(a) The purchase of the land.
(b) The cost and installation of machinery.
(c) The first five months' depletion assuming the land has a net salvage value of zero after the ore is mined.
(d) The first five months' depreciation on the machinery.
Complete this question by entering your answers in the tabs below.
Required A Required B Required C1 Required C2 Required D1 Required D2
Prepare the journal entry to…
Chapter 9 Solutions
Horngren's Financial & Managerial Accounting (5th Edition)
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