Question

montana mining company pays $3,239,950 for an ore deposit containing 1,496,000 tons. the company installs machinery in the mine costing $180,700. both the ore and machinery will have no salvage value after the ore is completely mined. montana mines and sells 159,800 tons of ore during the year. prepare the december 31 year - end entries to record both the ore deposit depletion and the mining machinery depreciation. mining machinery depreciation should be in proportion to the mines depletion. note: do not round intermediate calculations. round your final answers to the nearest whole number. view transaction list journal entry worksheet 1 2 record the year - end adjusting entry for the depletion expense of ore mine. note: enter debits before credits. date general journal debit credit december 31

Explanation:

Step1: Calculate depletion rate of ore deposit

Depletion rate = $\frac{\text{Cost of ore deposit}}{\text{Total tons of ore}}$ = $\frac{3239950}{1496000}\approx2.166$ per ton

Step2: Calculate depletion expense of ore mine

Depletion expense = Depletion rate $\times$ Tons of ore mined and sold = $2.166\times159800 = 345176.8\approx345177$

Step3: Calculate depreciation rate of mining machinery

Since mining machinery depreciation is in proportion to mine's depletion, and the cost of machinery is $180700$. The ratio of machinery cost to ore - deposit cost is $\frac{180700}{3239950}$. The depreciation expense of machinery is $\frac{180700}{3239950}\times345177\approx19423$

Answer:

Date	General Journal	Debit	Credit
	Accumulated Depletion - Ore Mine		345177
December 31	Depreciation Expense - Mining Machinery	19423
	Accumulated Depreciation - Mining Machinery		19423