Question - Dakota Mining Co: Prepare entries to record land, machinery, depletion, depreciation
On July 23 of the current year, Dakota Mining Company pays $4,836,000 for land estimated to contain 7,800,000 tons of recoverable ore. It installs machinery costing $390,000 that has a 10-year life and no salvage value and is capable of mining the ore deposit in eight years. The machinery is paid for on July 25; seven days before mining operations begin. The company removes and sells 400,000 tons of ore during its first five months of operations ending on Dec. 31. Depreciation of the machinery is in proportion to the mine's depletion as the machinery will be abandoned after the ore is mined.
a. Prepare entries to record purchase of the land
b. To record the cost and installation of machinery.
c. to record the first five month's depletion assuming the land has a net salvage value of zero after the ore is mined.
d. to record the first five month's depreciation on machinery.
Describe both the similarities and differences in amortization, depletion, and depreciation.