Caldwell Mining Co. acquired mineral rights for $48,750,000. The mineral deposit is estimated at 65,000,000 tons. During the current year, 19,500,000 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. Refer to the Chart of Accounts for exact wording of account titles.

A. $0.75 per ton

B. $14,625,000

C. Journal Entry :

Depletion Expense : mineral rights $14,625,000 (debit)

Accumulated Depletion :  mineral rights $14,625,000 (credit)

Explanation:

Depletion Rate = Cost of Asset ÷ Expected Total Contents in Units

                         =  $48,750,000 ÷ 65,000,000 tons

                         =  $0.75 per ton

Current year depletion expense = Depletion Rate × Number of Units during the period

                                                      =  $0.75 × 19,500,000 tons

                                                      =  $14,625,000

Journal Entry :

Depletion Expense : mineral rights $14,625,000 (debit)

Accumulated Depletion :  mineral rights $14,625,000 (credit)

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