A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. If 150,000 tons of ore are mined during the first year, the journal entry to record the depletion is:. a. Debit Depletion Expense $93,750; credit Natural Resources $93,750.
b. Debit Cash $112,500; credit Natural Resources $112,500.
c. Debit Depletion Expense $93,750; credit Accumulated Depletion $93,750.
d. Debit Cash $93,750; credit Accumulated Depletion $93,750.
e. Debit Depletion Expense $112,500; credit Accumulated Depletion $112,500.

Option c is the correct answer.

Explanation:

The depletion expense or charge for the period can be calculated using the following formula,

Depletion expense = [(Cost - Salvage Value) / Total units expected to be mined] * Units mined during the period

Depletion expense = [(1500000 - 250000) / 2000000] * 150000

Depletion expense = $93750

The entry to record the expense is,

Depletion expense            93750 Dr

     Accumulated depletion         93750 Cr

So, option c is the correct answer.

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a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.