PQR Mining Company purchased a site containing a mineral deposit on January 1, 2020. The purchase...

 

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PQR Mining Company purchased a site containing a mineral deposit on January 1, 2020. The purchase price was $820,000, and the site is estimated to contain 400,000 tons of extractable ore. PQR constructed a building at the site, at a cost of $500,000, to be used while the ore is being extracted. When the ore reserves are gone, the building will have no further value. (20 points) Required: A. Explain the objective of recording depletion of natural resources. B. Determine PQR's depletion rate per ton of ore. C. Prepare the journal entry to record depletion for the year 2020, if PQR mined and sold 160,000 tons of ore. D. Prepare the journal entry to record depreciation on the building for 2020. PQR calculates depreciation on the building using the units-of-production method based on the amount of ore extracted (160,000 tons in 2020). PQR Mining Company purchased a site containing a mineral deposit on January 1, 2020. The purchase price was $820,000, and the site is estimated to contain 400,000 tons of extractable ore. PQR constructed a building at the site, at a cost of $500,000, to be used while the ore is being extracted. When the ore reserves are gone, the building will have no further value. (20 points) Required: A. Explain the objective of recording depletion of natural resources. B. Determine PQR's depletion rate per ton of ore. C. Prepare the journal entry to record depletion for the year 2020, if PQR mined and sold 160,000 tons of ore. D. Prepare the journal entry to record depreciation on the building for 2020. PQR calculates depreciation on the building using the units-of-production method based on the amount of ore extracted (160,000 tons in 2020).

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Answer A The objective of recording depletion is to systematically and rationally allocate th... View the full answer