Prepare journal entries to record the following: 1. Purchase of the ore property 2. Payment for other relevant costs 3. Installation of the heavy machinery 4. Depletion for the first six months 5. Depreciation for the first six months
Problem 1
Fool’s Gold, Inc. paid P5,000,000 for land having an ore body estimated to contain 2,000,000 tons of ore. The land will have
a value of P400,000 after exhaustion of the mine. Other relevant costs paid were:
Exploration cost P1,000,000
Geological survey 500,000
Development cost P1,500,000
The entity installed heavy machinery costing P4,000,000, having a 10-year useful life and capable of exhausting the mine
in 8 years. The entity mined 300,000 tons of ore during the first six months of operations.
Required:
Prepare
1. Purchase of the ore property
2. Payment for other relevant costs
3. Installation of the heavy machinery
4. Depletion for the first six months
5.
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