Natural Resources

The Hollister Company acquires a silver mine at the cost of $2,200,000 on January 1. Along with the purchase price Hollister pays additional costs associated with development of $50,000. Hollister expects the mine will have a salvage value of $325,000 once all the silver has been mined. Best estimates are that the mine contains 250,000 tons of ore.

Required

a. Prepare the entry to record the purchase of the silver mine.

b. Prepare the December 31 year-end adjusting entry to record depletion is 60,000 tons of ore are mined and all the ore is sold.

c. Prepare the December 31 year-end adjusting entry to record depletion is 60,000 tons of ore are mined but only 15,000 tons of the ore are sold.

	Description		Debit	Credit
a.	AnswerAccumulated depletion - Silver mineCashDepletion expense - Silver mineSilver inventorySilver mine		Answer	Answer
	AnswerAccumulated depletion - Silver mineCashDepletion expense - Silver mineSilver inventorySilver mine		Answer	Answer
	Purchase of silver mine
b.	AnswerAccumulated depletion - Silver mineCashDepletion expense - Silver mineSilver inventorySilver mine		Answer	Answer
	AnswerAccumulated depletion - Silver mineCashDepletion expense - Silver mineSilver inventorySilver mine		Answer	Answer
	To record depletion on silver mine.
c.	Silver inventory		Answer	Answer
	AnswerAccumulated depletion - Silver mineCashDepletion expense - Silver mineSilver inventorySilver mine		Answer	Answer
	AnswerAccumulated depletion - Silver mineCashDepletion expense - Silver mineSilver inventorySilver mine		Answer	Answer
	To record depletion on silver mine.