Colorado Mining paid $600,000 to acquire a mine with 40,000 tons of coal reserves. The following statements model reflects Colorado Mining’s financial condition just prior to purchasing the coal reserves. The company extracted 15,000 tons of coal in year 1 and 18,000 tons in year 2.
a. Compute the depletion charge per unit.
b. Record the acquisition of the coal reserves and the depletion expense for years 1 and 2 in a financial statements model like the preceding one.
c. Prepare the general journal entries to record the depletion expense for years 1 and 2. Exercise