Airhead Oil Company’s balance sheet includes three assets: Natural Gas, Oil, and Coal. Suppose Airhead Oil Company paid $1,900,000 cash for the right to work a mine with an estimated 200,000 tons of coal. Assume the company paid $68,000 to remove unwanted buildings from the land and $45,000 to prepare the sudace for mining. Furiher, assume that Airhead Oil Company signed a $33,000 note payable to a company that will return the land sudace to its original condition after the mining ends. During the first year, Airhead Oil Company removed 41,000 tons of coal, which it sold on account for $36 per ton. Operating expenses for the first year totaled $248,000, all paid in cash.

Requirements 1. Record all of Airhead Oil Company’s transactions, including depletion, for the year.

2. Prepare the company’s income statement for its coal operations for the year.