1.On February 19 of the current year, Quartzite Co. pays $5,400,000 for land estimated to contain 4 mil lion tons of recoverable ore. It installs machinery costing $400,000 that has a 16 year life and no salvage value and is capable of mining the ore deposit in 12 years. The machinery is paid for on March 21, eleven days before mining operations begin. The company removes and sells 254,000 tons of ore during its first nine months of operations ending on December 31. Depreciation of the machinery is in proportion to the mines depletion as the machinery will be abandoned after the ore is mined.
Required:
Prepare entries to record
(a) The purchase of the land,
(b) The cost and installation of the machinery,
(c) The first nine months depletion assuming the land has a net salvage value of zero after the ore is mined,
(d) The first nine months depreciation on the machinery.
Analysis Component:
Describe both the similarities and differences in amortization, depletion, and depreciation.