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Question 10.7: Depletion Earth’s Treasures Mining Co. acquired mineral righ......

Depletion

Earth’s Treasures Mining Co. acquired mineral rights for $45,000,000. The mineral deposit is estimated at 50,000,000 tons. During the current year, 12,600,000 tons were mined and sold.

a.   Determine the depletion rate.

b.   Determine the amount of depletion expense for the current year.

c.   Journalize the adjusting entry on December 31 to recognize the depletion expense.

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a.   $0.90 per ton ($45,000,000/50,000,000 tons)

b.   $11,340,000 (12,600,000 tons × $0.90 per ton)

c.   Dec. 31 Depletion Expense . . . . . . . . . . . . . . . . . . . 11,340,000

Accumulated Depreciation . . .. . . . . . . . . . . . .                              11,340,000

Depletion of mineral deposit.

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