On May $1,$ Star Mines Inc. purchased an ore mine for $$5,400,000$ to access an estimated $2,799,000$ tons of ore. The company also incurred development costs of $$405,000$ related to the mine and purchased equipment for $$810,000$ with a useful life of $15$ years and no salvage value. The equipment has alternative uses outside of this mine project. The company is expected to restore the land after mining is complete. The present value of the restoration cost is estimated to be $$180,000.$ The company extracted $324,000$ tons of ore during the year and sold $270,000$ tons. Hint: For the purchase of this mine, an Asset Retirement Obligation is credited for the present value of restoration costs.

Required

a$.$ Record the entry for $(1)$ purchase and development costs of the mine and $(2)$ purchase of equipment on May $1.$ Assume all purchases were for cash.

b$.$ Record the entry for $(1)$ depletion of the ore and $(2)$ cost of sale of ore for the year.

c$.$ Calculate depreciation expense for the year, assuming that the company applies the straight$-$line depreciation method, and applies the full$-$year, end of period convention.

a$.$

Date Account Name Dr$.$ Cr$.$

May $1$

To record purchase of mine.

May $1$

To record purchase of mine equipment.

b$.$

Numerator $/$ Denominator $=$ Depletion Rate

$/=$

$$ Note: Use the depletion rate EXACTLY as shown above to calculate depletion below.

Date Account Name Dr$.$ Cr$.$

Dec $31$

To record depletion of ore.

Dec $31$

To record cost of sale of ore.

c$.$

Date Account Name Dr$.$ Cr$.$

Dec $31$

To record depreciation.