Asarco Mining paid 398 500 for the right to extract
Asarco Mining paid $ 398,500 for the right to extract mineral assets from a 200,000 tonne mineral deposit. In addition to the purchase price, Asarco Mining also paid a $ 500 filing fee, a $ 1,000 license fee to the Yukon Territory, and $ 60,000 for a geological survey of the property. Because the company purchased the rights to the minerals only, the company expected the asset to have zero residual value when fully depleted. During the first year, Asarco Mining removed 40,000 tonnes of minerals. Using the Mineral Assets account, make journal entries to record the following:
a. Purchase of the mineral rights
b. Payment of fees and other costs
c. Depletion for the first year (none of the minerals were sold during the year)
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