A Company Purchased a Tract of Land for Its Natural

question 121

Multiple Choice

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.If 150,000 tons of ore are mined during the first year,the journal entry to record the depletion is:

• A)Debit Depletion Expense $93,750;credit Natural Resources $93,750.
• B)Debit Cash $112,500;credit Natural Resources $112,500.
• C)Debit Depletion Expense $93,750;credit Accumulated Depletion $93,750.
• D)Debit Cash $93,750;credit Accumulated Depletion $93,750.
• E)Debit Depletion Expense $112,500;credit Accumulated Depletion $112,500.

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Definitions:

Organization Issuing

Refers to entities (like corporations, governments, or NGOs) that release or distribute something, often securities or official documents.

Future Revenues

Expected income from sales or services to be received in the future.

Stream Of Income

A consistent or predictable flow of revenue, which can come from investments, real estate, or other sources over a period of time.