Answered: f 18,000 tons were extracted during the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Penny Coal Mining acquires property at a cost of 10,000,000 and
development costs amounted to 2,400,000. After extraction has
occurred, the company must restore the property (the estimated present value of the obligation is 1,200,000), after which it can be sold for
3,400,000. The company estimates that 100,000 tons of coal can be
extracted. If 18,000 tons were extracted during the first year, which of the
following would be included in the entry to record the depletion?

a. Cr. Accumulated depletion - 3,060,000.

b. Cr. Inventory - 1,800,000

c. Dr. Accumulated depletion - 1,836,000

d. Dr. Inventory - 1,836,000

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