Calculate the year two depletion cost

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Question - Wildhorse Ltd. acquired the rights to use 1,500 hectares of land in northern Alberta to mine for uranium. The cost of the land was $90,000, exploration costs were $210,000, and the development costs incurred were $690,000. All of these costs were capitalized. The company estimated that the mine would produce about 198,000 ounces of uranium. In the first year, 24,750 ounces were extracted from the mine, of which 12,000 were sold. At the beginning of year two, the company revised its estimate and determined that the mine would produce a remaining amount of 138,600 ounces of uranium. In the second year, 32,000 ounces were extracted from the mine.

Required -

1. Calculate the year two depletion cost.

2. Prepare the journal entry for the year two depletion cost.

Reference no: EM132619268

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