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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

Respuesta :

Answer:

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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