Coronado Corporation acquires a coal mine at a cost of $448,000. Intangible development costs total $112,000. After extraction has occurred, Coronado must restore the property (estimated fair value of the obligation is $89,600), after which it can be sold for $179,200. Coronado estimates that 4,480 tons of coal can be extracted. If 784 tons are extracted the first year, prepare the journal entry to record depletion.

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Business

Bailey Leblanc

10 March, 00:46

Coronado Corporation acquires a coal mine at a cost of $448,000. Intangible development costs total $112,000. After extraction has occurred, Coronado must restore the property (estimated fair value of the obligation is $89,600), after which it can be sold for $179,200. Coronado estimates that 4,480 tons of coal can be extracted. If 784 tons are extracted the first year, prepare the journal entry to record depletion.

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Rayna Stephens · Answer 1

Dr Depletion expense 66,640

Cr Accumulated depletion 66,640

Explanation:

Coronado Corporation

Journal entry

Dr Depletion expense 66,640

Cr Accumulated depletion 66,640

Total Cost = $448,000+$112,000 =

$ 560,000

Depletion per ton

= ($560,000-$179,200) / 4,480

= 85 per ton

Depletion first year = 784*85 = 66,640