Question

on July 23 of the current year, Dakota Mining Co. pays $5,961,600 for land estimated to contain 8,280,000 tons of recoverable ore. It installs and pays for machinery costing $828,000 on July 25. The company removes and sells 426,500 tons of ore during its first five months of operations ending 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.

Answer 1

	Depreciation for 5 months =$828,000 * 426,500 tons / 8,280,000 tons =$42,650
Date	Account	Debit	Credit
Jul-23	Land	$              59,61,600
	Cash		$                  59,61,600
Jul-25	Machinery	$                8,28,000
	Cash		$                    8,28,000
Dec-31	Depletion expense-Machinery	$                   42,650
	Accumulated Depletion-Machinery		$                       42,650