On July 24 of the current year, Dakota Mining Co. pays $3,580 for land estimated to contain 4,750000 tons of recoverable ore. It installs machinery costing $330000 that has a 8-year life and no salvage value and is capable of mining the ore deposit in 7 years. The machinery is paid for on July 26, six days before mining operations begin. The company removes and sells 460,000 tons of ore during its first four months of operations. Depreciation of the machinery is in proportion to the mine's depletion as the machinery will be abandoned after the ore is mined.
(a) To record purchase of the land.
(b) To record the cost and installation of machinery.
(c) To record the first four month's depletion assuming the land has a net salvage value of zero after the ore is mined.
(d) To record the first four month's depreciation on machinery.
DR: Land 3,580
CR: Cash 3,580
This solution provides the journal entries to record the transactions. Dakota Mining Company is examined.