Return to question On July 23 of the current year, Dakota Mining Co. pays $8,084

Question

Return to question On July 23 of the current year, Dakota Mining Co. pays $8,084,160 for land estimated to contain 9,624,000 tons of recoverable ore. It installs machinery costing $673,680 that has a 10-year life and no salvage value and is capable of mining the ore deposit in eight years The machinery is paid for on July 25, seven days before mining operations begin. The company removes and sells 494,250 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. 0 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) To record the purchase of the land. (b) To record the cost and installation of machinery. (c) To record the first five months' depletion assuming the land has a net salvage value of zero after the ore is mined. (d) To record the first five months' depreciation on the machinery. Answer is not complete. Complete this question by entering your answers in the tabs below.

Explanation / Answer

Workings:

Depletion per ton = $8084160/9624000 tons = $0.84 per ton

Depletion expense-land = 494250 tons x $0.84 = $415170

Depreciation expense-machinery = $673680 x 494250/9624000 = $34597.50 = $34598

No. Date General Journal Debit Credit (a) Jul. 23 Land 8084160 Cash 8084160 (To record the purchase of land) (b) Jul. 25 Machinery 673680 Cash 673680 (To record the cost and installation of machinery) (c) Dec. 31 Depletion expense-land 415170 Accumulated depletion-land 415170 (To record depletion of land) (d) Dec. 31 Depreciation expense-machinery 34598 Accumulated depreciation-machinery 34598 (To record depreciation on machinery)

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