Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 18E
a.
To determine
Compute the depletion charge per unit.
b.
To determine
Record the acquisition of the coal reserve and the depletion expense for Years 1 and Year 2 in a financial statement model.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Depletion: Calculating and Journalizing
Mineral Works Co. acquired a salt mine at a cost of $1,700,000, with no expected
salvage value. The estimated number of units available for production from the mine is
3,400,000 tons.
a. During the first year, 200,000 tons are mined and sold.
b. During the second year, 600,000 tons are mined and sold.
Required:
1. Calculate the amount of depletion expense for both years.
Year 1
Year 2
2. Prepare general journal entries for depletion expense.
Page: 1
DOC. POST.
NO. REF.
DATE ACCOUNT TITLE
DEBIT CREDIT
1 Year 1
2
3
3
4 Year 2
4
5
6
6
Depletion: Calculating and Journalizing
Mineral Works Co. acquired a salt mine at a cost of $1,925,000, with no expected salvage value. The estimated number of units available for production from the mine is 3,500,000 tons.
a. During the first year, 220,000 tons are mined and sold.
b. During the second year, 290,000 tons are mined and sold.
Required:
1. Calculate the amount of depletion expense for both years.
Year 1
Year 2
2. Prepare general journal entries for depletion expense.
Page: 1
DOC. POST.
DATE
ACCOUNT TITLE
DEBIT CREDIT
NO.
REF.
1 Year 1
1
2
3
3
4 Year 2
4
5
Colorado Mining paid $495,000 to acquire a mine with 45,000 tons of coal reserves. The following statements model reflects Colorado Mining’s financial condition just prior to purchasing the coal reserves. The company extracted 23,625 tons of coal in year 1 and 20,250 tons in year 2.
Required
Compute the depletion charge per unit.
b-1. Compute the depletion expense for years 1 and 2 in a financial statements.
b-2. Record the acquisition of the coal reserves and the depletion expense for years 1 and 2 in a financial statements model. The first event is recorded as an example.
Req A
Req B1
Req B2
Compute the depletion charge per unit.
Depletion charge per unit
per ton.
Compute the depletion expense for years 1 and 2 in a financial statements.
Depletion Expense
Year 1
Year 2
Record the acquisition of the coal reserves and the depletion expense…
Chapter 6 Solutions
Survey Of Accounting
Ch. 6 - 1. What is the difference between the functions of...Ch. 6 - Prob. 2QCh. 6 - Prob. 3QCh. 6 - 4. Define depreciation. What kind of asset...Ch. 6 - Prob. 5QCh. 6 - Prob. 6QCh. 6 - Prob. 7QCh. 6 - 8. Explain the historical cost concept as it...Ch. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - Prob. 11QCh. 6 - 12. Explain straight-line, units-of-production,...Ch. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - Prob. 16QCh. 6 - 17. What is salvage value?Ch. 6 - Prob. 18QCh. 6 - Prob. 19QCh. 6 - Prob. 20QCh. 6 - Prob. 21QCh. 6 - 22. Why would a company choose to depreciate one...Ch. 6 - Prob. 23QCh. 6 - 27. How are capital expenditures made to improve...Ch. 6 - Prob. 25QCh. 6 - Prob. 26QCh. 6 - Prob. 27QCh. 6 - Prob. 28QCh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prob. 3ECh. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - LO 8-1 Exercise 8-6 A Allocating costs for a...Ch. 6 - Effect of depreciation on the accounting equation...Ch. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Events related to the acquisition, use, and...Ch. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Prob. 20ECh. 6 - Prob. 21ECh. 6 - Accounting for acquisition of assets, including a...Ch. 6 - Calculating depreciation expense using three...Ch. 6 - Determining the effect of depreciation expense on...Ch. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Prob. 28PCh. 6 - Revision of estimated salvage value Delta Machine...Ch. 6 - Purchase and use of tangible asset: Three...Ch. 6 - Recording continuing expenditures for plant assets...Ch. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Prob. 34PCh. 6 - Prob. 35PCh. 6 - Performing ratio analysis using real-world data...Ch. 6 - Prob. 1ATCCh. 6 - ATC 6-3 Research Assignment Comparing Microsofts...Ch. 6 - Prob. 4ATCCh. 6 - ATC 6-5 Ethical Dilemma Whats an expense? Several...
Knowledge Booster
Similar questions
- DEPLETION: CALCULATING AND JOURNALIZING Mining Works Co. acquired a copper mine at a cost of 1,200,000, with no expected salvage value. The estimated number of units available for production from the mine is 3,000,000 tons. (a) During the first year, 400,000 tons are mined and sold. (b) During the second year, 700,000 tons are mined and sold. REQUIRED 1. Calculate the amount of depletion expense for both years. 2. Prepare general journal entries for depletion expense.arrow_forwardWhen depreciation is recorded each period, what account is debited? a. Depreciation Expense b. Cash c. Accumulated Depreciation d. The fixed asset account involved Use the following information for Multiple-Choice Questions 7-4 through 7-6: Cox Inc. acquired a machine for on January 1, 2019. The machine has a salvage value of $20,000 and a 5-year useful life. Cox expects the machine to run for 15,000 machine hours. The machine was actually used for 4,200 hours in 2019 and 3,450 hours in 2020.arrow_forwardEstimate the average total estimated useful life of depreciable property, plant, and equipment. Starbucks reports 580.6 million of depreciation and amortization in the statement of cash flows, of which 4.5 million relates to amortization of limited-life intangible assets. Does the estimate reconcile with stated accounting policy on useful lives for property, plant, and equipment? Explain.arrow_forward
- Colorado Mining paid $750,000 to acquire a mine with 50,000 tons of coal reserves. The financial statements model shown on the last tab reflects Colorado Mining’s financial condition just prior to purchasing the coal reserves. The company extracted 26,250 tons of coal in year 1 and 22,500 tons in year 2. Required Compute the depletion charge per unit. b-1. Compute the depletion expense for years 1 and 2 in a financial statements. b-2. Record the acquisition of the coal reserves and the depletion expense for years 1 and 2 in a financial statements model.arrow_forwardCalculating Depletion, Depreciation, and Ending Inventory Aerial Company acquired land containing natural resources on January 1 that it planned to extract for $6 million. The amount allocated to the land is $220,000. Surveys estimate that the recoverable resources will total 4 million tons. The company paid an additional $440,000 for development of the mining land to prepare for the extraction of the resources. The company also incurred $220,000 to install mining equipment with a useful life of 8 years. The equipment will not be used for other projects. The company is obligated to restore the site after the extraction of resources. The present value of this obligation is $55,000. The company extracted 528,000 tons of natural resources during the year and 495,000 tons were sold during the year. Required a. Determine depletion for the natural resource during the year. Hint: Equipment cost is accounted for separately and its depreciation is recorded as Depreciation Expense. Numerator /…arrow_forwardOn April 17 of the current year, a mining company purchased the rights to a mine. The purchase price plus additional costs necessary to prepare the mine for extraction of minerals totaled $6,300,000. The company expects to extract 1,050,000 tons of minerals during a four-year period. During the current year, 255,000 tons were extracted and sold immediately. Required: 1. Calculate depletion for the current year. 2. Is depletion considered part of the product cost and included in the cost of inventory? 1. Depletion for the current year 2. Is depletion considered part of the product cost and included in the cost of inventory?arrow_forward
- Hidden Hollow Mining Co. acquired mineral rights for $42,500,000. The mineral deposit is estimated at 50,000,000 tons. During the current year, 11,500,000 tons were mined and sold. a. Determine the depletion rate. If required, round your answer to two decimal places.$fill in the blank 91e68b00e031f88_1 per ton b. Determine the amount of depletion expense for the current year.$fill in the blank 91e68b00e031f88_2 c. Journalize the adjusting entry on December 31 to recognize the depletion expense. If an amount box does not require an entry, leave it blank. Dec. 31 fill in the blank 346c5df8f020fe0_2 fill in the blank 346c5df8f020fe0_3 fill in the blank 346c5df8f020fe0_5 fill in the blank 346c5df8f020fe0_6arrow_forwardColorado Mining paid $621,800 to acquire a mine with 816,000 tons of coal reserves. The horizontal statements model reflects Colorado Mining’s financial condition just prior to purchasing the coal reserves. The company extracted 428,400 tons of coal in Year 1 and 367,200 tons in Year 2. Requireda. Compute the depletion charge per unit.b. Record the acquisition of the coal reserves and the depletion expense for years 1 and 2 in a financial statements model like the preceding one.c. Prepare the general journal entries to record the depletion expense for years 1 and 2.arrow_forwardThe Weber Company purchased a mining site for $573,259 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 94,508 tons will be recovered. During the first year the company extracted 4,359 tons of ore. The depletion expense is a.$51,961.60 b.$23,966.29 c.$26,459.13 d.$53,643.00arrow_forward
- Comparing Theee Depreciation Methods Dexter Industries purchased packaging equipment on January 8 for $233,400. The equipment was expected to have a useful ife of three years, or 6,300 operating hours, and a residual value of $19,200. The equipment was used for 2,520 hours during Year 1, 1,953 hours in Year 2, and 1,827 hours in Year 3. Required: 1. Determine the amount of depreciation expense for the three years ending December 31, Year 1, Year 2, Vear 3, by (a) the straight-ine method, (b) the unite-of- activity method, and (e) the double-decining-balance method, Also determine the total depreciation expense for the three years by each method. Note: For all methods, round the answer for each year to the nearest whole dollar. Depreciation Expense Straight-Line Nethod Units-of-Activity Method Double-Declining-Balance Method Year Year 1 Year 2 Year 3 Total 2. What method yields the highest depreciation expense for Year 17 3. What method ylelds the most depreciation over the three-year…arrow_forwardNatural Resources The Hollister Company acquires a silver mine at the cost of $1,300,000 on January 1. Along with the purchase price Hollister pays additional costs associated with development of $50,000. Hollister expects the mine will have a salvage value of $100,000 once all the silver has been mined. Best estimates are that the mine contains 250,000 tons of ore. Required a. Prepare the entry to record the purchase of the silver mine. b. Prepare the December 31 year-end adjusting entry to record depletion is 60,000 tons of ore are mined and all the ore is sold. c. Prepare the December 31 year-end adjusting entry to record depletion is 60,000 tons of ore are mined but only 15,000 tons of the ore are sold. Description Debit Credit a. Answer Answer Answer Answer Answer Answer Purchase of silver mine b. Answer Answer Answer Answer Answer Answer To record depletion on silver mine. c. Silver inventory Answer Answer Answer…arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningSurvey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning