Flossil Fossils Company Purchased a Tract of Land Containing Coal

question 82

Essay

Flossil Fossils Company purchased a tract of land containing coal in the current year for $20,000,000 and then spent $30,000,000 to get a mine ready for operation. The company estimates that there will be 10,000,000 tons of coal available over the next 10 years. The land has a residual value of $500,000. During the current year, 1,000,000 tons of coal were mined.
A)Compute the cost of the natural resource and the depletion rate.
B)Record the journal entry as of December 31 for the current year depletion.

• A)Compute the cost of the natural resource and the depletion rate.
• B)Record the journal entry as of December 31 for the current year depletion.

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Definitions:

Shim Pack Thickness

The combined thickness of a set of shims (thin pieces of material) used to adjust the spacing or clearance between components in machinery.

Differential Carrier

The drive axle assembly that houses the differential gearing.

Differential Pinion Gears

Small gears within the differential that engage with the larger ring gear to allow wheels on the same axle to rotate at different speeds.

Low Axle Lube Level

Low axle lube level indicates an insufficient amount of lubricant in the vehicle's axle system, which can lead to increased friction and damage.