Flossil Fossils Company Purchased a Tract of Land Containing Coal

Essay

Flossil Fossils Company purchased a tract of land containing coal in the current year for $20,000,000 and then spent $30,000,000 to get a mine ready for operation. The company estimates that there will be 10,000,000 tons of coal available over the next 10 years. The land has a residual value of $500,000. During the current year, 1,000,000 tons of coal were mined.
A)Compute the cost of the natural resource and the depletion rate.
B)Record the journal entry as of December 31 for the current year depletion.