Computing Depletion Expense

On January 1, the company purchased a mine for $100,000. At that time, it was estimated that the mine contained 5,000 tons of ore. It is also estimated that the mine will have a residual value of $20,000 when all of the ore is extracted. During the year, the company extracted 900 tons of ore from the mine.

1. Compute depletion expense for the year.

2. Make the journal entry necessary to record the depletion expense.