Compute the revised depreciation for the third year. If no entry is required, select 'No Entry' for the account titles and enter 0 for the amounts. The following equation is used to calculate accumulated depletion: Depletion cost of a period Depletion cost per unit Number of units extracted during period. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. (Credit account titles are automatically indented when amount is entered. Next, determine the total number of units that have been consumed/extracted so far. 0.50.) Prepare the journal entry to record depletion. The total number of units expected to be produced by the resource is 50,000.
The following example outlines the steps and information needed to calculate a depletion expense.įirst, determine the total cost per unit.įor this example, the cost to purchase, explore, and develop the resource was $1,000,000.00.
Depreciation for Period Number of Units Used in a Period Depreciation per Unit. Depreciation per Unit Depreciable Base / Useful Units. Depreciable Base Asset Cost - Salvage Value. The depreciable base is given as extra information. Depreciation per unit and depreciation for a period. I purchased more than one block of units. The activity method calculation requires 2 equations. These natural resources can be anything from gas, to oil, to mineral, and more. declared as a dividend to their shareholders on SeptemThe cost basis for these units is 20.695 per unit.
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