Problem 8-31A Accounting for depletion LO 8-7, 8-9

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, 2016	Purchased for $205,000 a silver mine estimated to contain 818,000 tons of silver ore.
July 1, 2016	Purchased for $1,900,000 cash a tract of land containing timber estimated to yield 3,070,000 board feet of lumber. At the time of purchase the land was estimated at $182,000.
Feb. 1, 2017	Purchased for $755,000 a gold mine estimated to yield 28,700 tons of goldveined ore.
Sept. 1, 2017	Purchased oil reserves for $717,000. The reserves were estimated to contain 242,000 barrels of oil, of which 18,000 would be unprofitable to pump.

Required:

a.

Prepare the journal entries to account for the following:

(1)

The 2016 purchases.

(2}

Depletion on the 2016 purchases, assuming that 72,000 tons of silver were mined and 1,045,000 board feet of lumber were cut.

(3)

The 2017 purchases.

(4)

Depletion on the four natural resource assets, assuming that 60,000 tons of silver ore, 1,199,000 board feet of lumber, 9,300 tons of gold ore, and 78,000 barrels of oil were extracted. (Round all cost estimated 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.)

b.Prepare the portion of the December 31, 2017, balance sheet that reports natural resources. (Round your answers to the nearest dollar amount.)

c.Assume that in 2018 the estimates changed to reflect only 54,020 tons of gold ore remaining. Prepare the depletion journal entry for 2018 to account for the extraction of 37,814 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.)