Favre Exploration Corporation engages in the exploration and development of many types of natural resources. The company

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Favre Exploration Corporation engages in the exploration and development of many types of natural resources. The company has engaged in the following activities:
Jan. 1, 2010 Purchased a coal mine estimated to contain 200,000 tons of coal for $900,000.
Feb. 1, 2010 Purchased a silver mine estimated to contain 30,000 tons of silver for $750,000.
July 1, 2010 Purchased for $2,500,000 a tract of timber estimated to yield 3,000,000 board feet of lumber and to have a residual land value of $250,000.
Aug. 1, 2010 Purchased for $720,000 oil reserves estimated to contain 380,000 barrels of oil, of which 20,000 would be unprofi table to pump.
Required
a. Determine the amount of depletion expense to recognize on the 2010 income statement for each of the four reserves, assuming 62,000 tons of coal, 1,200,000 board feet of lumber, 9,000 tons of silver, and 80,000 barrels of oil are extracted.
b. Prepare the portion of the December 31, 2010, balance sheet that reports natural resources.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Survey of Accounting

ISBN: 978-0073379555

2nd edition

Authors: Edmonds, old, Mcnair, Tsay

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