The Journal Entry Required to Recognise Depreciation on a Drilling $\quad$

question 7

Multiple Choice

The journal entry required to recognise depreciation on a drilling rig that is being used in the exploration phase of a mining project is:

• A) DR \(\quad\)Depreciation expense - drilling rig\(\quad\)\(\quad\)XX
• CR \(\quad\)Accumulated depreciation - drilling rig\(\quad\)XX
• B) DR \(\quad\)Intangible E&E asset\(\quad\)\(\quad\)\(\quad\)XX
• CR \(\quad\)Accumulated depreciation - drilling rig \(\quad\)XX
• C) DR \(\quad\)Depreciation expense-drilling rig \(\quad\)XX
• CR \(\quad\)Intangible E&E asset\(\quad\)\(\quad\)\(\quad\)XX
• D) DR \(\quad\)Intangible E&E asset\(\quad\)\(\quad\)\(\quad\)XX
• CR \(\quad\)Depreciation expense - drilling rig\(\quad\)XX

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Definitions:

Acceptable Earnings Rate

The minimum rate of return on investment that a company or investor is willing to accept, considering the risk and opportunity cost of the investment.

Useful Life

The estimated period over which a fixed asset is expected to be usable by the business, impacting depreciation calculations.

Salvage Value

An estimation of what an asset will be worth at the end of its usable life.

Payback Period

This is the length of time required to recover the initial investment cost of a project, calculated by dividing the investment amount by the annual cash inflows.