Question

Mighty Mountain Mining paid $ 442 comma 700 for the right to extract mineral assets from a 450 comma 000​-ton deposit. In addition to the purchase​ price, Mighty also paid a $ 300 filing​ fee, a $ 2 comma 000 license fee to the state of​ Nevada, and $ 50 comma 000 for a geological survey of the property. Because Mighty 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, Mighty removed and sold 60 comma 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.)

Answer 1

No.	Account Titles and Explanation	Debit	Credit
a	Minerals	$442,700
	Cash		$442,700
b	Minerals (300+2000+50000)	$52,300
	Cash		$52,300
c	Depletion expense [(442700+52300) x 60000/450000]	$66,000
	Minerals		$66,000