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Gimli Miners recently purchased the rights to a diamond mine

Accounting

Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $3113 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 90,000 tons Year 3: 100,000 tons Year 4: 110,000 tons Year 5: 130,000 tons Calculate the depletion expense for the next five years, and create the journal entry for year one.

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Cost of Ore (a) $3,113
Total expected tons of Ore (b) 1,000,000
Cost per ton (c = a/b) $0.003113
Depletion Expense:  
   Year 1 (50,000 tons * $0.003113) $155.65
   Year 2 (90,000 tons * $0.003113) $280.17
   Year 3 (100,000 tons * $0.003113) $311.30
   Year 4 (110,000 tons * $0.003113) $342.43
   Year 5 (110,000 tons * $0.003113) $342.43
Journal Entries
Date Account Titles and Explanation Debit Credit
Year 1 Depletion Expense $155.65  
     Accumulated Depletion Expense   $155.65
  (To record the depletion expense for first year)

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