1. On January 1 of the current year, MMM, Inc. paid $5,400,000 with a down-payment of $1,000,000 cash and signing a promissory note with a consortium of banks in the amount of $4,400,000, for an ore mine estimated to contain 7,200,000 tons of recoverable ore.

The company installed machinery on January 2 costing $864,000. The controller estimates that the machinery has an 8-year life and no salvage value. In conjunction with geology engineers, the controller also estimated that the mine will be operable and productive for 6 years and will have no salvage value at the end of its productive life.

The company removes and sells 745,000 tons of ore during its first year of operations ended on December 31.

Depreciation of the machinery is in proportion to the mines depletion as the machinery will be abandoned after the ore is mined.

Using the attached T-account template ((or prepare an equation presentation): prepare the entries to recognize:

1. the purchase of the ore mine
2. the purchase of the machinery
3. the annual ore mine depletion assuming the ore mine has aero salvage value
4. the annual machinery depreciation.