Sierra Mountain Mining paid $448,500 for the right to extract mineral assets from a 500,000-ton deposit. In addition to the purchase price, Sierra also paid a $500 filing fee, a $1,000 license fee to the state of Nevada, and $60,000 for a geological survey of the property. Because Sierra purchased the rights to the minerals only, it expects the asset to have zero residual value. During the first year, Sierra removed 50,000 tons of the minerals.
Requirement
1. Make journal entries to record
(a) Purchase of the minerals (debit Mineral asset),
(b) Payment of fees and other costs, and
(c) Depletion for the first year.