Ex. 255
Koch Company owns equipment that cost $100,000 when purchased on January 1, 2008. It has been depreciated using the straight-line method based on estimated salvage value of $10,000 and an estimated useful life of 5 years.
Instructions
Prepare Koch Company's journal entries to record the sale of the equipment in these four independent situations.
(a)Sold for $56,000 on January 1, 2011.
(b)Sold for $56,000 on May 1, 2011.
(c)Sold for $22,000 on January 1, 2011.
(d)Sold for $22,000 on October 1, 2011.
Equipment 100,000
Ex. 256
On July 1, 2011, Jenner Inc. invested $640,000 in a mine estimated to have 800,000 tons of ore of uniform grade. During the last 6 months of 2011, 100,000 tons of or were mined and sold.
Instructions
(a)Prepare the journal entry to record depletion expense.
(b)Assume that the 100,000 tons of ore were mined, but only 85,000 units were sold. How are the costs applicable to the 15,000 unsold units reported?
Ex. 257
Neosho Mining invested $720,000 in a mine estimated to have 1,200,000 tons of ore with no salvage value. During the first year, 200,000 tons of ore were mined and sold.
Instructions
Prepare the journal entry to record depletion expense.
Ex. 258
Lowe Mining Company purchased a mine for $70 million which is estimated to have 250,000 tons of ore and a salvage value of $10 million.
(a)In the first year, 50,000 tons of ore are extracted and sold. Prepare the journal entry to record depletion expense for the first year.
(b)In the second year, 150,000 tons of ore are extracted but only 125,000 tons are sold. Prepare the journal entry to record depletion expense for the second year.
(c)What amount and in what account are the tons of ore not sold reported?
Ex. 259
Dayton Mining Company purchased land containing an estimated 15 million tons of ore at a cost of $6,000,000. The land without the ore is estimated to be worth $900,000. The company expects to operate the mine for 10 years. Buildings costing $500,000 are erected on the site and are expected to last for 25 years. Equipment costing $300,000 with an estimated life of 12 years is installed. The buildings and the equipment possess no salvage value after the mine is closed. During the first year of operations, the mining company mined and sold 2 million tons of ore.
Instructions
(a)Compute the depletion charge per ton.
(b)Compute the depletion expense for the first year.
(c)Compute the appropriate first year's depreciation expense for the buildings.
(d)Compute the appropriate first year's depreciation expense for the equipment.
(e)Prepare journal entries to record depletion and depreciation expenses for the year.