Question

Knowledge Check 01 Last year, Mountain Top, Inc., purchased a coal mine at a cost of $900,000. The salvage value has been estimated at $100,000. The coal mine has an estimated 200,000 tons of available coal. A total of 70,000 tons were mined and sold during the current year. Complete the necessary journal entry to record depletion expense for the current year by selecting the account names and dollar amounts from the drop-down menus.

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

Depletion expense - Coal Deposit Dr, $280,000

          (($900,000 - $100,000) ÷ 200,000) × 70,000

                  To Accumulated depletion -Coal Deposit $280,000

(Being depletion expense for the current year is recorded)

For recording the depletion expense for the current year we simply debited the Depletion expense - coal deposit as it increased the expenses  and we credited the accumulated depletion -coal deposit as it reduced the value of the assets