A bauxite mine was acquired at a cost of $1,500,000 and estimated to contain 6,000,000 tons of ore. During the year, 95,000 tons were mined and sold. Prepare the journal entry for the year's depletion expense.
To prepare the journal entry for the year's depletion expense, we need to calculate the depletion rate per ton of ore and then multiply it by the number of tons mined during the year.
First, let's calculate the depletion rate per ton:
Depletion rate per ton = Acquisition cost / Estimated tons of ore
Depletion rate per ton = $1,500,000 / 6,000,000 tons
Depletion rate per ton = $0.25 per ton
Next, let's calculate the depletion expense for the year:
Depletion expense = Depletion rate per ton * Tons mined and sold
Depletion expense = $0.25 * 95,000 tons
Depletion expense = $23,750
Now, let's prepare the journal entry:
Date | Account Title | Debit ($) | Credit ($)
--------------------------------------------------------------
Year-end | Depletion Expense | $23,750 |
| | |
| Accumulated | | $23,750
| Depletion | |
| Expense |
In this journal entry, we debit the Depletion Expense account with $23,750, which represents the expense for the year. And we credit the Accumulated Depletion Expense account with the same amount to record the total depletion expense incurred over time.
Please note that the journal entry assumes a single year's depletion expense. If there were previous years' depletion expenses, you would need to take those into account as well.