Question
I have solved the following question but don't know the correct answer for entry 2. Diamond Company acquires an ore mine at a cost of
I have solved the following question but don't know the correct answer for entry 2.
Diamond Company acquires an ore mine at a cost of $1,300,000. It incurs additional costs of $200,000 to access the mine, which is estimated to hold 500,000 tons of ore. The estimated value of the land after the ore is removed is $150,000.
- Prepare the entry(ies) to record the cost of the ore mine.
- Prepare the year-end adjusting entry if 90,000 tons of ore are mined and sold the first year.
My answer:
For entry 1, I debited ore mine for $1,500,000 and credited cash for $1,500,000.
For entry 2, I have 2 seperate possible answers and am unsure which is correct.
Possible solution 1 for entry 2 is debit depletion expense $243,000 and credit ore mine $243,000
Possible solution 2 for entry 2 is debit depletion expense, debit ore inventory and credit accumulated depletion (I am unsure of exact numbers on this one too)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started