Rocky Mines paid $426,000 for the right to extract ore from a 275,000-ton mineral deposit. In addition to the purchase price, Rocky Mines also paid a $120 filing fee, a $2,100 license fee to the state of Colorado, and $64,030 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, Rocky Mines removed 40,000 tons of ore. Make journal entries to record
(a) Purchase of the mineral rights
(b) Payment of fees and other costs
(c) Depletion for first-year production.
What is the mineral assets book value at the end of the year?