Problem $8-34$A Accounting for depletion

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:

Jan. $1,$ Year $1$ Purchased for $$1,500,000$ a silver mine estimated to contain $100,000$ tons of silver ore. July $1,$ Year $1$ Purchased for $$1,700,000$ cash a tract of land containing timber estimated to yield $1,000,000$ board feet of lumber. At the time of purchase, the land had an appraised of $$100,000.$

Feb. $1,$ Year $2$ Purchased for $$2,700,000$ a gold mine estimated to yield $50,000$ tons of gold$-$veined ore Sept. $1,$ Year $2$ Purchased oil reserves for $$1,300,000.$ The reserves were estimated to contair $270,000$ barrels of oil, of which $10,000$ would be unprofitable to pump.

Required

a$.$ Prepare the journal entries to account for the following:

$(1)$ The Year $1$ purchases.

$(2)$ Depletion on the Year $1$ purchases, assuming that $14,000$ tons of silver were mined an $500,000$ board feet of lumber were cut.

$(3)$ The Year $2$ purchases.

$(4)$ Depletion on the four natural resource assets, assuming that $20,000$ tons of silver ore, $300,0$ board feet of lumber, $4,000$ tons of gold ore, and $50,000$ 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 $20,000$ tons of gold ore remainit Prepare the depletion journal entry in Year $3$ to account for the extraction of $10,000$ tons of gold $c$