Mountain Mining paid $ 598 comma 100 for the right to extract mineral assets from a 450 comma 000 -ton deposit. In addition to the purchase price, Sierra also paid a $ 300 filing fee, a $ 1 comma 600 license fee to the state of Nevada, and $ 75 comma 000 for a geological survey of the property. Because Sierra 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, Sierra removed and sold 50 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.

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