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Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed and sold?
Multiple Choice
Debit Depreciation Expense $93,158; credit Accumulated Depreciation $93,158.
Debit Amortization Expense $112,100; credit Natural Resources $112,100.
Debit Depreciation Expense $98,333; credit Accumulated Depreciation $98,333.
Debit Depletion Expense $93,158; credit Accumulated Depletion $93,158.
Debit Depletion Expense $112,100; credit Accumulated Depletion $112,100.

Respuesta :

mltn1980

Answer:

  • What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed and sold?

Debit Depletion Expense $112,100; credit Accumulated Depletion $112,100.

Explanation:

Where does the value of $ 112,110 come from?

The granite quarry was acquired by $590,000

The estimated value of granite it's estimated to be 200,000 tons.

It means $590,000 / 200,000 tons = $2,95 Unit Cost of each granite ton.

If the company extracted 38,000 tons at unit cost of $2,95 , it's equal to $112,100  

We debit the Depletion Account and not use depreciation o amortization because the term Depletion it's used when extracted natural resources from earth as granite, wood or coal, etc.

The term Depletion it's used to recognize  in the accounting system that the company is consuming the natural resources acquired previously.

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