Question

On July 23 of the current year, Dakota Mining Co. pays $8,215,680 for land estimated to contain 9,336,000 tons of recoverable ore. It installs and pays for machinery costing $1,493,760 on July 25. The company removes and sells 479,250 tons of ore during its first five months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine's depletion as the machinery will be abandoned after the ore is mined. Required: Prepare entries to record the following. (Do not round your intermediate calculations. Round "Depletion per ton" to two decimal places and round all other answers to the nearest whole dollar.) (a) The purchase of the land. (b) The cost and installation of machinery. (c) The first five months' depletion assuming the land has a net salvage value of zero after the ore is mined. (d) The first five months' depreciation on the machinery.

Record the cost of the ore mine of $8,215,680 cash.

Record the cost of the machinery of $1,493,760 cash.

To record the first five months' depletion assuming the land has a net salvage value of zero after the ore is mined.

Record the year-end adjusting entry for the depletion expense of ore mine.

To record the first five months' depreciation on the machinery.

	Select formula for Units of Production Depreciation: Calculate Depreciation expense: Depreciation per ton Tonnage Depreciation expense

Record the year-end adjustin g entry for the depletion expense of ore mine.

Answer 1

Journal entries
Date	General Journal	Debit	Credit
July 23	Mineral deposit	$        8,215,680
	Cash		$       8,215,680
	To record the purchase of the land.
July 25	Machinery	$        1,493,760
	Cash		$       1,493,760
	To record the cost and installation of machinery.

		Land	Machine
	Assets cost	$      8,215,680	$       1,493,760
Less:	Salvage value	$                      0	$                       0
	Depreciable cost	$      8,215,680	$       1,493,760
Divided by:	Useful life in ores	9,336,000	9,336,000
	Depletion per tone ore	$                0.88	$                 0.16
	Depletion per tone ore	$                0.88	$                 0.16
Multiply:	Ore sold	479,250	479,250
	Depletion/deprecation	$         421,740	$             76,680

Journal entries
Date	General Journal	Debit	Credit
Dec 31	Depletion expense - Mineral deposit	$            421,740
	Accumulated Depletion		$           421,740
	To record the first five months' depletion for land.
Dec 31	Deprecation expense - Machinery	$              76,680
	Accumulated Deprecation		$             76,680
	To record the deprecation on machinery.