Answer:
a. Minerals A/c Dr $598,100
To Cash A/c $598,100
(Being the minerals purchased for cash)
b. Various vendor A/c Dr $76,900
To Cash A/c $76,900
(Being payment of fees is recorded)
c. Depletion A/c Dr $79,500
To Minerals A/c $79,500
(Being the depletion for the first year is recorded)
Explanation:
The journal entries are shown below:
a. Minerals A/c Dr $598,100
To Cash A/c $598,100
(Being the minerals purchased for cash)
b. Various vendor A/c Dr $76,900
To Cash A/c $76,900
(Being payment of fees is recorded)
Minerals A/c Dr $76,900
To Cash A/c $76,900
(Being payment of fees is recorded)
The computation is shown below:
= Filling fee + license fee + geological survey of the property
= $300 + $1,600 + $75,000
= $76,900
c. Depletion A/c Dr $79,500
To Minerals A/c $79,500
(Being the depletion for the first year is recorded)
The computation is shown below
First we have to compute the depletion per ton which is presented below:
= (Paid amount of Mountain Mining + Filling Fee + License fee - Geological survey of the property) ÷ (Number of tons deposit)
= ($598,000 + $300 + $1,600 + $75,000) ÷ (450,000 tons)
= $1.59
Now if 50,000 tons are sold in first year, so the depletion would be
= 50,000 tons × $1.59
= $79,500
