Answer:
journal entries to make are as shown below: DAKOTA MINING CO
question 1
Date Transaction Debit credit amount
July 23 land purchase Land account $ 4,715,000
july 23 land purchase Bank $ 4,715,000
question 2
July 25 Machine cost machine account $410,000
July 25 Machine cost bank $410,000
December 31 depletion 5 months profit $441,600
December 31 depletion mine reserve $0.92/ton
December 31 Depreciation profit $441,600
December 31, depreciation land $441,600
Explanation:
Purchase of fixed asset: the asset account usually have debit balances, so you debit the asset account and credit Dakota bank account where the money was paid out. The land account and machine accout will have the purchase cost/installation cost as debit balances(entries) respectively while Dakota Mining co bank account will be credited with the respective amounts $ 4,715,000 -land purchase and $410,000- machine cost/installation.
The depletion quantity in 5 months was given. using ratio we extrapolate the depletion quantity was a full year as 1,152,000 QTY (12/5 X 480,000)
= 1,152,000 QTY the useful life of the mine is then calculated by dividing the reserve amount by the annual production of 1,152,000 = 4.448784 yrs
depreciation annually = divide cost of land by useful life = $1.059,840
5 months depreciation = 5/12 x annual depreciation = $441,600
depletion per ton is gotten as follows: divide $441,600 by 480,000 tons mined for 5 months = 0.92/ton depletion rate
