Flossil Fossils Company Purchased a Tract of Land Containing Coal

question 154

Essay

Flossil Fossils Company purchased a tract of land containing coal in Year 1 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 Year 2,1,000,000 tons of coal was mined.
A) Compute the cost of the natural resource and the depletion rate.
B) Record the journal entry for the Year 1 depletion.

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