Question

Rocky Mountain Mining paid $ 982,700 for the right to extract mineral assets from a 500,000​-ton deposit. In addition to the purchase​ price, Rocky also paid a $600 filing​ fee, a $ 1,700 license fee to the state of​ Nevada, and $ 65,000 for a geological survey of the property. Because Rocky purchased the rights to the minerals only and did not purchase the​ land, it expects the asset to have zero residual value. During the first​ year, Rocky removed and sold 20,000 tons of the minerals. Make journal entries to record​ (a) purchase of the minerals​ (debit Minerals),​ (b) payment of fees and other​ costs, and​ (c) depletion for the first year. ​(Record debits​ first, then credits. Select the explanation on the last line of the journal entry​ table.) Begin by journalizing​ (a) the purchase of the minerals​ (debit Mineral​ asset). ​(Do not record payment for any additional costs associated with the minerals. We will do this in entry​ b.)

Rocky Mountain Mining paid 5982.700 for the right to extract mineral assets from a 500,000-ton deposit. In addition to the purchase price, Rocky also paid a $600 filing fee, a $1,700 license fee to the state of Nevada, and $65,000 for a geological Survey of the property. Because Rocky purchased the rights to the minerals only and did not purchase the land, expects the asset to have zero residual value. During the first year, Rocky removed and sold 20.000 tons of the minerals. Make loumal entries to record (a) purchase of the minerals (debit Minerals). (b) payment of fees and other costs, and (c) depletion for the first year. Record debits first then credits Select the explanation on the last line of the journal entry table) Begin by joumalizing (a) the purchase of the minerals (debit Mineral asset). (Do not record payment for any additional costs associated with the minerals. We will do this in entry b.) Date Accounts and Explanation Debit Credit

Answer 1

Rocky Mountain Mining
a)	General,Journal	Debit	Credit
	Minerals	$    9,82,700.00
	To Cash		$ 9,82,700.00
	(Amount paid for mining right to extract mineral assets)
b)	Minerals($600+$1700+$65000)	$        67,300.00
	To Cash		$     67,300.00
	(Amount paid for filing fees,licence fees and geological survey of the property)
c )	Depletion Expense	$        42,000.00
	To Accumulated Depletion		$     42,000.00
	(amount of depletion expense)
	Depletion per ton
	Minerals cost($982700+$67300)=(A)	$ 10,50,000.00
	Mineral Assets=(B)	500000
	Depletion per ton=(C )=(A)/(B)	$                  2.10	per unit
	Sold mineral in tons=(D )	20000
	Depletion Expense=(C)*(D )	$        42,000.00