Question

Flannery Company engages In the exploration and development of many types of natural resources. In the last two years, the company has engaged In the following activities Jan Year 1 Purchased for $28e,980 a silver mine estimated to contain 828,880 tons of silver ore July , Year 1 Purchased for $2,898,8ee cash a tract of land containing timber estimated to yield 3,848,8e8 board feet of lumber At the time of purchase, the land had an appraised of $179,88 Feb. 1, Year 2 Purchased for $781,88e a gold mine estimated to yield 29,988 tons of gold-veined ore Sept., Year 2 Purchased oil reserves for $70e,880. The reserves were estimated to contain 248,88e barrels of oil, of which 25,88e would be unprofitable to pump Required a. Prepare the journal entries to account for the following: (1) The Year 1 purchases. (2) Depletion on the Year 1 purchases, assuming that 71,000 tons of silver were mined and 971,000 board feet of lumber were cut. (3) The Year 2 purchases. (4) Depletion on the four natural resource assets, assuming that 61,000 tons of sllver ore, 1,126,000 board feet of lumber, 8,800 tons of gold ore, and 82,000 barrels of oll were extracted. b. Prepare the portion of the December 31, Year 2, balance sheet that reports natural resources c. Assume that In Year 3 the estimates changed to reflect only 50,320 tons of gold ore remalning. Prepare the depletion journal entry In Year 3 to account for the extraction of 35,224 tons of gold ore Complete this question by entering your answers in the tabs below Required A Required BRequired C Prepare the journal entries to account for the following: (1) The Year 1 purchases (2) Depletion on the Year 1 purchases, assuming that 71,000 tons of silver were mined and 971,000 board feet of lumber were cut (3) The Year 2 purchases (4) Depletion on the four natural resource assets, assuming that 61,000 tons of silver ore, 1,126,000 board feet of lumber, 8,800 tons of gold ore, and 82,000 barrels of oil were extracted. (Round all cost estimated to 2 decimal places and final answers to the nearest dollar amount. Enter depletion expenses in the given order. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Show lessA

Answer 1

Depletion expenses per unit
Silver ores:
Cost of ore mines			200000
Less: Salvage value			0
Depreciable ccost			200000
Divide: Total tons			828000
Depletion expense per ton			0.242
Lumber:
Cost of land			2090000
Less: Salvage value			179000
Depreciable cost			1911000
Divide: Total Timber			3040000
Depletion per Board feet			0.629
Gold mine:
Cost of mine			781000
Less: Ssalvage value			0
Depreciable cost			781000
Divide: Total tons			29900
Depletion expense per ton			26.12
Oil reserves:
Cost of oil reserves			700000
Less: Salvage value			0
Depreciable cost			700000
Divide: Total barrels			223000
	(248000-25000)
Depletion per barrel			3.139
Journal entries:
Date	Accounts title and explanation				Debit $	Credit $
01.01 Yr1	Silver mines rights				200000
	Cash account					200000
01.07 Yr1	Timber Account				2090000
	Cash account					2090000
31.12 Yr1	Depletion expenses -Silver				17182
	Accumulated dep-Silver mines					17182
		(71000*0.242)
31.12.Yr1	Depletion expenses-Timber				610759
	Accumulated dep-Timber					610759
		(971000*0.629)
01.02.Yr2	Gold mines Account				781000
	Cash account					781000
01.09 Yr2	Oil reserves				700000
	Cash account					700000
31.12 Yr2	Depletion expenses -Silver				14762
	Accumulated dep-Silver mines					14762
		(61000*0.242)
31.12.Yr1	Depletion expenses-Timber				708254
	Accumulated dep-Timber					708254
		(1126000*0.629)
31.12.Yr2	Depletion expense-Gold mine				229856
	Accumulated dep-Gold mine					229856
		(8800*26.12)
31.12. Yr2	Depletion expenses-Oil reserves				257398
	Accumulated dep-Oil reserves					257398
		(82000*3.139)
Req b:
balance sheet
Natural resources:
Silver Mine				200000
Less: Accumulated depletion (14762+17182)				31944	168056
Timber				2090000
Less: Accumulated depletion (708254+610759)				1319013	770987
Gold mine				781000
Less: Accumulated depletion				229856	551144
Oil reserves				700000
Less: Accumulated depletion				257398	442602
Total Natural resources					1932789
Req c:
Net Book value of Gold mine at end of Year-2					551144
Divide: Remaining ore available					50320
Revised depletion expense per ton					10.95
Ore extracted					35224
Depletion expense for Year-3					385702.8
Journal entry:
Date	Accounts title and explanations				Debit$	Credit $
31.12Yr3	Depletion expense-Gold mine				385703
	Accumulated dep-Gold					385703