Question

In: Accounting

A company pays $782,800 cash to acquire an iron mine on January 1. At that same...

A company pays $782,800 cash to acquire an iron mine on January 1. At that same time, it incurs additional costs of $61,800 cash to access the mine, which is estimated to hold 103,000 tons of iron. The estimated value of the land after the iron is removed is $20,600. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Prepare the January 1 entry to record the cost of the iron mine.
2. Prepare the December 31 year-end adjusting entry if 20,900 tons of iron are mined but only 18,600 tons are sold the first year.

Solutions

Expert Solution

ANSWER

1)

Particulars Amount Amount
January 1 Iron Mine A/c                   844,600
            To Cash A/c                     844,600
(To record the payment of wages)

2)

Depletion expense = ($884,600- $20,600)/103,000 tons

Depletion expense = $8.4 per ton

The Depletion expense as on December = $8.4 * 20,900tons = $175,560

Particulars Amount Amount
December 31 Depletion Expense A/c - Iron Mine 175,560
          To Accumulated Depletion A/c 175,560
(To record the depletion expense)

================

DEAR STUDENT,

IF YOU HAVE ANY QUERY PLEASE ASK ME IN THE COMMENT BOX,I AM HERE TO HELP YOU.PLEASE GIVE ME POSITIVE RATING..

****************THANK YOU****************

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

On January 1, 2017, Boss Co. pays $96,000 to acquire 30% of the voting common stock...
On January 1, 2017, Boss Co. pays $96,000 to acquire 30% of the voting common stock of People Inc. Boss uses the equity method to account for its investment.  At the time of the investment, People Inc. had net assets with a book value of $240,000 and with one undervalued net asset building which is undervalued in book by $30,000 (remaining useful life 15 years on 1/1/17). During 2017, People Inc. reported a net income of $100,000 and paid dividends of...
Surat Limited paid cash to acquire an aircraft on January 1, 2017, at a cost of...
Surat Limited paid cash to acquire an aircraft on January 1, 2017, at a cost of 31,480,000 rupees. The aircraft has an estimated useful life of 50 years and no salvage value. The company has determined that the aircraft is composed of three significant components with the following original costs (in rupees) and estimated useful lives: Component Cost Useful Life Fuselage 10,100,000 50 years Engines 16,100,000 40 years Interior 5,280,000 30 years 31,480,000 The U.S. parent of Surat does not...
Surat Limited paid cash to acquire an aircraft on January 1, 2017, at a cost of...
Surat Limited paid cash to acquire an aircraft on January 1, 2017, at a cost of 33,050,000 rupees. The aircraft has an estimated useful life of 40 years and no salvage value. The company has determined that the aircraft is composed of three significant components with the following original costs (in rupees) and estimated useful lives: Component Cost Useful Life Fuselage 11,800,000 40 years Engines 16,200,000 30 years Interior 5,050,000 20 years 33,050,000 The U.S. parent of Surat does not...
Surat Limited paid cash to acquire on aircraft on January 1, 2017, at a cost of...
Surat Limited paid cash to acquire on aircraft on January 1, 2017, at a cost of 33,160,000 rupees. The aircraft has an estimated useful life of 50 years and no salvage value. The company has determined that the aircraft is composed of three significant components with the following original costs (in rupees) and estimated useful lives: Component Cost Useful Life Fuselage 11,400,000 50 years Engines 16,600,000 40 years Interior 5,160,000 30 years 33,160,000 The U.S. parent of Surat does not...
On January 1, 2014, JVE Corp. paid $1,000,000 cash to acquire 35% of the common shares...
On January 1, 2014, JVE Corp. paid $1,000,000 cash to acquire 35% of the common shares of PG Corp. At the time of acquisition, the carrying amount of PG’s common shares was $900,000, and its retained earnings were $1,500,000. The fair values of the identifiable net assets (INA) approximated their carrying values except for the following: • The fair value of machinery was estimated to be $400,000; the net book value was $450,000. Other information follows: • The remaining useful...
1.On January 1, 2016 Crane Company will acquire a new asset that costs $400,000 and that...
1.On January 1, 2016 Crane Company will acquire a new asset that costs $400,000 and that is anticipated to have a salvage value of $30,000 at the end of four years. The new asset: • qualifies as three-year property under the Modified Accelerated Cost Recovery System (MACRS) • will replace an old asset that currently has a tax basis of $80,000 and that can be sold on this date for $60,000 • will continue to generate the same operating revenues...
On January 1, Tesco Company spent a total of $4,144,000 to acquire control over Blondel Company....
On January 1, Tesco Company spent a total of $4,144,000 to acquire control over Blondel Company. This price was based on paying $499,000 for 20 percent of Blondel’s preferred stock and $3,645,000 for 90 percent of its outstanding common stock. At the acquisition date, the fair value of the 10 percent noncontrolling interest in Blondel’s common stock was $405,000. The fair value of the 80 percent of Blondel’s preferred shares not owned by Tesco was $1,996,000. Blondel’s stockholders’ equity accounts...
Salter mining Company purchased the Northern Tier Mine for $42 million cash. The mine was estimated...
Salter mining Company purchased the Northern Tier Mine for $42 million cash. The mine was estimated to contain 9.7 million tons of ore and to have a residual value of $1.1 million. During the first year of mining operations at the Northern Tier Mine, 60000 tons of ore were mined of which 14000 tons were sold a) preys journal to record depletion during the year B) Show how the Northern Tier Mine and it’s accumulated depletion would appear in Salter...
Salter Mining Company purchased the Northern Tier Mine for $34 million cash. The mine was estimated...
Salter Mining Company purchased the Northern Tier Mine for $34 million cash. The mine was estimated to contain 2.56 million tons of ore and to have a residual value of $1.6 million. During the first year of mining operations at the Northern Tier Mine, 80,000 tons of ore were mined, of which 12,000 tons were sold. a. Prepare a journal entry to record depletion during the year. b. Show how the Northern Tier Mine, and its accumulated depletion, would appear...
Asset Retirement Obligation On January 1, 2013, Major Company purchased a uranium mine for $800,000. On...
Asset Retirement Obligation On January 1, 2013, Major Company purchased a uranium mine for $800,000. On that date, Major estimated that the mine contained 1,000 tons of ore. At the end of the productive years of the mine, Major Company will be required to spend $4,200,000 to clean up the mine site. The appropriate discount rate is 8%, and it is estimated that it will take approximately 14 years to mine all of the ore. Major uses the productive-output method...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT