In 2019, Eldenburg Mining Company purchased land for $7,200,000 that had a natural resource reserve estimated to be 500,000 tons. Development and road construction costs on the land were $420,000. and a building was constructed at a cost of $50.000. When the natural resources are completely extracted. the land has an estimated residual value of $1,200.000. In addition. the cost to restore the property to comply with environmental regulations is estimated to be $800,000. Production in 2019 and 2020 was 60,000 tons and 85,000 tons, respectively.
a. Compute the depletion charge for 2019 and 2020.
b. Prepare a journal entry to record each year’s depletion expense as determined in part a.
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