Flannery Company engages in the exploration and development of many types of natural resources. In the last two years, the company has engaged in the following activities: January 1, Year 1 Purchased for $185,000 a silver mine estimated to contain 794,000 tons of silver ore. July 1, Year 1 Purchased for $2,000,000 cash a tract of land containing timber estimated to yield 3,000,000 board feet of lumber. At the time of purchase, the land had an appraised of $101,000. February 1, Year 2 Purchased for $760,000 a gold mine estimated to yield 28,000 tons of gold-veined ore. September 1, Year 2 Purchased oil reserves for $789,000. The reserves were estimated to contain 242,000 barrels of oil, of which 25,000 would be unprofitable to pump. Required a. Prepare the journal entries to account for the following items. Assume all purchase transactions were made with cash. (1) The Year 1 purchases. (2) Depletion on the Year 1 purchases, assuming that 75,000 tons of silver were mined and 1,005,000 board feet of lumber were cut. (3) The Year 2 purchases. (4) Depletion on the four natural resource assets, assuming that 60,000 tons of silver ore, 1,258,000 board feet of lumber, 8,800 tons of gold ore, and 85,000 barrels of oil were extracted. b. Prepare the portion of the December 31, Year 2 , balance sheet that reports natural resources. c. Assume that in Year 3 the estimates changed to reflect only 37,000 tons of gold ore remaining. Prepare the depletion journal entry in Year 3 to account for the extraction of 25,900 tons of gold ore. Prepare the journal entries to account for the following items. Assume all purchase transactions were made with cash. (1) The Year 1 purchases. (2) Depletion on the Year 1 purchases, assuming that 75,000 tons of silver were mined and 1,005,000 board feet of lumber were cut. (3) The Year 2 purchases. (4) Depletion on the four natural resource assets, assuming that 60,000 tons of silver ore, 1,258,000 board feet of lumber, 8,800 tons of gold ore, and 85,000 barrels of oil were extracted. (Round all estimated costs to 2 decimal places and final answers to the nearest dollar amount. Enter depletion expenses in the given order. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Prepare the portion of the December 31 , Year 2 , balance sheet that reports natural resources. (Round your answers to the nearest dollar amount.) Assume that in Year 3 the estimates changed to reflect only 37,000 tons of gold ore remaining. Prepare the depletion journal entry in Year 3 to account for the extraction of 25,900 tons of gold ore. (Round intermediate calculation to 2 decimal places and final answers to nearest dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
