ACTS: Johnson Mining Company purchased land containing mineral ore on February 1, 20Y1, at a cost of $1,250,000. It estimated that a total of 60,000 tons of mineral were available for mining. It incurred intangible developmental costs of $200,000 before it was able to do any mining. After it has removed all the natural resources, the company will be required to restore the property to its previous state because of strict environmental protection laws. It estimates the present value of this future restoration obligation is $90,000, and that it will be able to sell the property afterwards for $100,000. In 20Y1, resources removed totaled 30,000 tons. The company sold 23,000 tons of mineral ore for $36 a ton. REQUIRED:
1. Calculate the depletion rate for Johnson’s mineral ore.
2. Record the entries related to the above transactions from 20Y1. Use the t-accounts on page 3. Assume transactions are in cash, unless told otherwise.
3. Show the impacts of the above transactions on Johnson’s financial statements for 20Y1. Use the templates on page 2. Check figures have been provided.