Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Big Sky Mining Co. acquired mineral rights for $41,449,000. The mineral deposit is estimated at 18,100,000 tons. During the current year, 1,500,000 tons were mined

Big Sky Mining Co. acquired mineral rights for $41,449,000. The mineral deposit is estimated at 18,100,000 tons. During the current year, 1,500,000 tons were mined and sold.

Required:
A. Determine the amount of depletion expense for the current year.
B.

Journalize the adjusting entry to recognize the depletion expense. Refer to the Chart of Accounts for exact wording of account titles. (Note: The company makes all adjusting entries on December 31.)

CHART OF ACCOUNTS
Big Sky Mining Co.
General Ledger
ASSETS
110 Cash
111 Petty Cash
112 Accounts Receivable
114 Interest Receivable
115 Notes Receivable
116 Merchandise Inventory
117 Supplies
119 Prepaid Insurance
120 Land
123 Delivery Truck
124 Accumulated Depreciation-Delivery Truck
125 Equipment
126 Accumulated Depreciation-Equipment
130 Mineral Rights
131 Accumulated Depletion
132 Goodwill
133 Patents
LIABILITIES
210 Accounts Payable
211 Salaries Payable
213 Sales Tax Payable
214 Interest Payable
215 Notes Payable
EQUITY
310 Common Stock
311 Retained Earnings
312 Dividends
313 Income Summary
REVENUE
410 Sales
610 Interest Revenue
620 Gain on Sale of Delivery Truck
621 Gain on Sale of Equipment
622 Gain on Sale of Mineral Rights
EXPENSES
510 Cost of Merchandise Sold
520 Salaries Expense
521 Advertising Expense
522 Depreciation Expense-Delivery Truck
523 Delivery Expense
524 Repairs and Maintenance Expense
529 Selling Expenses
531 Rent Expense
532 Depreciation Expense-Equipment
533 Depletion Expense
534 Amortization Expense-Patents
535 Insurance Expense
536 Supplies Expense
539 Miscellaneous Expense
710 Interest Expense
720 Loss on Sale of Delivery Truck
721 Loss on Sale of Equipment
722 Loss on Sale of Mineral Rights

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions