On April 2, 2017, Montana Mining Co. pays $4,595,740 for an ore deposit containing 1,427,000 tons. The company installs machinery in the mine costing $211,800, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Montana begins mining on May 1, 2017, and mines and sells 136,400 tons of ore during the remaining eight months of 2017.
Prepare the December 31, 2017, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine’s depletion.
Explanation
To record depletion: [$4,595,740 / 1,427,000 tons = $3.220561 per ton; 136,400 tons × $3.220561 = $439,284].
To record depreciation: [$211,800 / 1,427,000 tons = $0.148423 per ton; 136,400 tons × $0.148423 = $20,245].
Thank you!
Prepare the December 31, 2017, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine’s depletion.
Explanation
To record depletion: [$4,595,740 / 1,427,000 tons = $3.220561 per ton; 136,400 tons × $3.220561 = $439,284].
To record depreciation: [$211,800 / 1,427,000 tons = $0.148423 per ton; 136,400 tons × $0.148423 = $20,245].
Thank you!
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