Caldwell Mining Co. acquired mineral rights for $127,500,000. The mineral deposit is estimated at 425,000,000 tons

Caldwell Mining Co. acquired mineral rights for $127,500,000. The mineral deposit is estimated at 425,000,000 tons. During the current year, 42,000,000 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.


Answer:
a. $0.30 per ton = $127,500,000 ÷ 425,000,000 tons
b. $12,600,000 = 42,000,000 tons × $0.30 per ton








c. Dec. 31 Depletion Expense 12,600,000
Accumulated Depletion 12,600,000
Depletion of mineral deposit.




Equipment with a cost of $180,000 has an estimated residual value of $14,400, has an estimated useful life of 16 years, and is depreciated by the straight-line method. (a) Determine the amount of the annual depreciation. (b) Determine the book value at the end of the tenth year of use. (c) Assuming that at the start of the eleventh year the remaining life is estimated to be eight years and the residual value is estimated to be $10,500, determine the depreciation expense for each of the remaining eight years.


Answer:
a. $10,350 [($180,000 – $14,400) ÷ 16]
b. $76,500 [$180,000 – ($10,350 × 10)]
c. $8,250 [($76,500 – $10,500) ÷ 8]