Metals Exploration Corporation 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:
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 80,000 tons of coal were mined and 1,000,000 board feet of lumber were cut.
(3) The Year 2 purchases.
(4) Depletion on the four reserves, assuming that 68,000 tons of coal, 1,200,000 board feet of lumber, 9,000 tons of silver, 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 50,000 tons of coal remaining. Prepare the depletion journal entry for Year 3 to account for the extraction of 40,000 tons of coal.
