Everly Corporation acquires a coal mine at a cost of 602000

Everly Corporation acquires a coal mine at a cost of $602,000. Intangible development costs total $150,500. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $120,400), after which it can be sold for $240,800. Everly estimates that 6,020 tons of coal can be extracted. If 1,054 tons are extracted the first year, prepare the journal entry to record depletion.

Solution

Account Title

Debit

Credit

Inventory

110670

Coal Mine

110670

Explanation:

$602000 + $150500 + $120400 - $240800 = $105 per ton

                           $6020

$1054 x $105 = $110670