Air-heart Oil Company’s balance sheet includes three assets: Natural Gas, Oil, and Coal. Suppose Air-heart Oil Company paid $1,900,000 cash for the right to work a mine with an estimated 200,000 tonnes of coal. Assume the company paid $68,000 to remove unwanted buildings from the land and $45,000 to prepare the surface for mining. Further, assume that Air-heart Oil Company signed a $33,000 note payable to a company that will return the land surface to its original condition after the mining ends. During the first year, Air-heart Oil Company removed 41,000 tonnes 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 Air-heart Oil Company’s transactions, including depletion, for the year.

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