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1 November, 16:23

Sands Company purchased mining rights for $500,000.

They expect to harvest 1 million tons of ore over the next five years.

During the current year Sands mined 350,000 tons of ore.

The entry to record the depletion would include:

a) a credit to Depletion Expense for $350,000

b) a debit to Depletion Expense for $175,000

c) a debit to Accumulated Depletion for $175,000

d) a credit to Accumulated Depletion for $350,000

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  1. 1 November, 17:00
    0
    b) a debit to Depletion Expense for $175,000

    Explanation:

    The computation of the depletion expense is shown below:

    Depletion expense = (Purchase of mining rights * current year mined tons of ore) : (expected harvested tons of ore)

    = ($500,000 * 350,000 tons) : (1,000,000 tons)

    = $175,000

    So the journal entry would be

    Depletion Expense A/c Dr $175,000

    To Accumulated Depletion A/c $175,000

    (Being the depletion expense is recorded)
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