Question

exercise 8-19 (algo) depletion of natural resources lo p3
montana mining company pays $4,715,070 for an ore deposit containing 1,481,000 tons. the company installs machinery in the mine costing $218,400. both the ore and machinery will have no salvage value after the ore is completely mined. montana mines and sells 187,400 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
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record the year-end adjusting entry for the depletion expense of ore mine.
note: enter debits before credits.

Explanation:

Step1: Calculate depletion per ton

$\text{Depletion per ton} = \frac{\text{Cost of ore deposit}}{\text{Total tons of ore}} = \frac{4,715,070}{1,481,000}$

Step2: Compute ore depletion expense

$\text{Depletion Expense} = \text{Depletion per ton} \times \text{Tons mined} = \frac{4,715,070}{1,481,000} \times 187,400 = 596,490$

Step3: Calculate depreciation per ton

$\text{Depreciation per ton} = \frac{\text{Cost of machinery}}{\text{Total tons of ore}} = \frac{218,400}{1,481,000}$

Step4: Compute machinery depreciation

$\text{Depreciation Expense} = \text{Depreciation per ton} \times \text{Tons mined} = \frac{218,400}{1,481,000} \times 187,400 = 27,660$

Answer:

Journal Entry 1 (Ore Deposit Depletion):

Date	General Journal	Debit	Credit
	Accumulated Depletion - Ore Deposit		596,490

Journal Entry 2 (Machinery Depreciation):

Date	General Journal	Debit	Credit
	Accumulated Depreciation - Machinery		27,660