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Question
Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000. It incurs additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. What journal entry would be needed to record the expense for the first year assuming 418,000 tons were mined?A.Debit Depletion Expense $1,233,100; credit Accumulated Depletion $1,233,100.
B.Debit Amortization Expense $1,358,500; credit Accumulated Amortization $1,358,500.
C.Debit Depreciation Expense $1,358,500; credit Accumulated Depreciation $1,358,500.
D.Debit Depletion Expense $1,358,500; credit Accumulated Depletion $1,358,500.
E.Debit Depreciation Expense $1,233,100; credit Accumulated Depreciation $1,233,100.
Answer
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