Saturday, October 12, 2019

Crazy Jim’s Mining Co. acquired mineral rights for $21,750,000. The mineral deposit is estimated at 15,000,000 tons

Crazy Jim’s Mining Co. acquired mineral rights for $21,750,000. The mineral deposit is estimated at 15,000,000 tons. During the current year, 3,600,000 tons were mined and sold.

a. Determine the amount of depletion expense for the current year.
b. Journalize the adjusting entry to recognize the depletion expense.


Answer:









a. $21,750,000 ÷ 15,000,000 tons = $1.45 depletion per ton
3,600,000 tons × $1.45 = $5,220,000 depletion expense

b.
 Depletion Expense 5,220,000
Accumulated Depletion 5,220,000
Depletion of mineral deposit.


Voss Company acquired patent rights on January 6, 2011, for $480,000. The patent has a useful life equal to its legal life of eight years. On January 3, 2014, Voss successfully defended the patent in a lawsuit at a cost of $80,000.

a. Determine the patent amortization expense for the current year ended December 31, 2014.
b. Journalize the adjusting entry to recognize the amortization.


Answer:







a. ($480,000 ÷ 8) + ($80,000 ÷ 5) = $76,000 total patent expense 
b.

Amortization Expense—Patents 76,000
Patents 76,000
Amortized patent rights ($60,000 + $16,000).

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