Boulder Mines paid $425,000 for the right to extract ore from a 250,000-ton mineral deposit. In addition to the purchase price, Boulder Mines also paid a $110 filing fee, a $2,000 license fee to the state of West Virginia, and $55,390 for a geologic survey of the property. Because the company purchased the rights to the minerals only, it expects the asset to have zero residual value when fully depleted.
During the first year of production, Boulder Mines removed 35,000 tons of ore, of which it sold 30,000 tons. Make journal entries to record
(a) Purchase of the mineral rights,
(b) Payment of fees and other costs,
(c) Depletion for first-year production, and
(d) Sales of ore.