In 2015, Marvin's Mining Company purchased land for $41,600,000 that had a natural resource reserve estimated to be 690,000 tons. Development and road construction costs on the land were $1,440,000 and a building was constructed at a cost of $880,000. When the natural resources are completely extracted, the land has an estimated residual value of $5,600,000. In addition, the cost to restore the property to comply with environmental regulations is estimated to be $3,080,000. Production in 2015 and 2016 was 50,000 tons and 65,000 tons, respectively.
A. Compute the depletion charge for 2015 and 2016. Include depreciation on the building, if any, as part of the depletion charge.
B. Prepare a journal entry to record each year's depletion expense.

Question

Quizplus · Accepted Answer

The Answer of In 2015, Marvin's Mining Company purchased land for $41,600,000 that had a natural resource reserve estimated to be 690,000 tons. Development and road construction costs on the land were $1,440,000 and a building was constructed at a cost of $880,000. When the natural resources are completely extracted, the land has an estimated residual value of $5,600,000. In addition, the cost to restore the property to comply with environmental regulations is estimated to be $3,080,000. Production in 2015 and 2016 was 50,000 tons and 65,000 tons, respectively.
A. Compute the depletion charge for 2015 and 2016. Include depreciation on the building, if any, as part of the depletion charge.
B. Prepare a journal entry to record each year's depletion expense.

In 2015, Marvin's Mining Company Purchased Land for $41,600,000 That