Having trouble with a couple problems. Please help! If you could help me with how to solve. Thank you. Pacific Energy Company's balance sheet includes the asset Iron Ore Rights. Pacific Energy paid $2.1 million cash for the right to work a mine that contained an estimated 180,000 tons of ore. The company paid $60,000 to remove unwanted buildings from the land and $70,000 to prepare the surface for mining. Pacific Energy also signed a $20,000 note payable to a landscaping company to return the land surface to its original condition after the rights to work the mine end. During the firstyear, Pacific Energy removed 30,000 tons of ore, of which it sold 23,400 tons on account for $30 per ton. Operating expenses for the first year totaled $240,000, all paid in cash. In addition, the company accrued income tax at the tax rate of 25%. During the first year, Pacific Energy removed 30,000 tons of ore. Record the journal entry for depletion. Journal Entry Debit Credit Iron Ore Inventory Iron Ore rights Pacific Energy sold 23,400 tons of ore on account for $30 per ton. Begin by recording the sale. (Do not yet record the cost of goods sold related to this sale. We will do this in the following journal entry.) Journal Entry Debit Credit Accounts receivable. 702,000 Sales revenue 702,000 Now record the cost of sales. Journal Entry Debit Credit and The company accrued income tax at the tax rate of 25%. Journal Entry Debit Credit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Having trouble with a couple problems. Please help! If you could help me with how to solve. Thank you.

Pacific Energy Company's balance sheet includes the asset Iron Ore Rights. Pacific Energy paid $2.1 million cash for the right to work a mine that contained an estimated 180,000 tons of ore. The company paid $60,000 to remove unwanted buildings from the land and $70,000 to prepare the surface for mining. Pacific Energy also signed a $20,000 note payable to a landscaping company to return the land surface to its original condition after the rights to work the mine end. During the firstyear, Pacific Energy removed 30,000 tons of ore, of which it sold 23,400 tons on account for $30 per ton. Operating expenses for the first year totaled $240,000, all paid in cash. In addition, the company accrued income tax at the tax rate of 25%.

During the first year, Pacific Energy removed 30,000 tons of ore. Record the journal entry for depletion.

Journal Entry Debit Credit

Iron Ore Inventory

Iron Ore rights

Pacific Energy sold 23,400 tons of ore on account for $30 per ton. Begin by recording the sale. (Do not yet record the cost of goods sold related to this sale. We will do this in the following journal entry.)

Journal Entry Debit Credit

Accounts receivable. 702,000

Sales revenue 702,000

Now record the cost of sales.

Journal Entry Debit Credit

and

The company accrued income tax at the tax rate of 25%.

Journal Entry Debit Credit

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Step 1 Introduction

Cost of Goods Sold: COGS are the direct costs of manufacturing a company's products. Materials and labor directly utilized to manufacture the item are included in this cost. However, it does not include indirect costs, such as those associated with distribution and sales.

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