On July 1 of the Current Year, Botox Mining Co

question 129

Essay

On July 1 of the current year, Botox Mining Co. pays $5,400,000 for land estimated to contain 7,200,000 tons of recoverable ore. It installs machinery on July 3 costing $864,000 that has an 8 year life and no residual value and is capable of mining the ore deposit in six years. The company removes and sells 745,000 tons of ore during its first six months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine's depletion as the machinery will be abandoned after the ore is mined.
Prepare entries to record (a) the purchase of the ore deposit, (b) the costs and installation of the machinery, (c) the depletion assuming the land has a zero residual value, and (d) the depreciation on the machinery.

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Definitions:

Long-Run Equilibrium

A state in a market where all firms are making normal profits, and there is no incentive for firms to enter or exit the industry.

Plaster

A building material used for coating walls and ceilings, which hardens after application.

Labor

The human effort, both physical and mental, that is used to produce goods and services.

Interest Rate

The percentage of a sum of money charged for its use, often expressed as an annual rate in the context of loans or savings.