Answer Happy

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 $195,000 a silver mine estimated to contain 799,000 tons of
silver ore. July 1, Year 1 Purchased for $1,970,000 cash a tract of
land containing timber estimated to yield 2,910,000 board feet of
lumber. At the time of purchase, the land had an appraised of
$179,000. Feb. 1, Year 2 Purchased for $719,000 a gold mine
estimated to yield 29,500 tons of gold-veined ore. Sept. 1, Year 2
Purchased oil reserves for $791,000. The reserves were estimated to
contain 271,000 barrels of oil, of which 21,000 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 67,000 tons of silver were mined and 996,000 board
feet of lumber were cut. (3) The Year 2 purchases. (4) Depletion on
the four natural resource assets, assuming that 64,000 tons of
silver ore, 1,101,000 board feet of lumber, 8,900 tons of gold ore,
and 80,000 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
47,360 tons of gold ore remaining. Prepare the depletion journal
entry in Year 3 to account for the extraction of 33,152 tons of
gold ore.