In 2016, the Best Diamond Company purchased mineral rights for a diamond mine (industrial grade diamonds)by signing a promissory note for $7,000,000. In addition to the purchase price, Best paid cash of $100,000 for a geological survey and $20,000 for a license fee to the country where the mine is located. It is estimated that there will be no residual value when the mine is fully depleted and that the mine contains 1,000,000 carats of diamonds.
During the first year of mining, Best Diamond extracted 50,000 carats of diamonds which were not sold after they were extracted. In 2017, the company extracted 250,000 carats of diamonds and sold 200,000 carats of diamonds from its inventory.
Required:
Prepare the journal entry without explanations to:
1. Record the purchase of the diamond mineral rights.
2. Record depletion for 2016.
3a. Record depletion for 2017.
3b. Record cost of goods sold for 2017.

Question

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The Answer of In 2016, the Best Diamond Company purchased mineral rights for a diamond mine (industrial grade diamonds)by signing a promissory note for $7,000,000. In addition to the purchase price, Best paid cash of $100,000 for a geological survey and $20,000 for a license fee to the country where the mine is located. It is estimated that there will be no residual value when the mine is fully depleted and that the mine contains 1,000,000 carats of diamonds.
During the first year of mining, Best Diamond extracted 50,000 carats of diamonds which were not sold after they were extracted. In 2017, the company extracted 250,000 carats of diamonds and sold 200,000 carats of diamonds from its inventory.
Required:
Prepare the journal entry without explanations to:
1. Record the purchase of the diamond mineral rights.
2. Record depletion for 2016.
3a. Record depletion for 2017.
3b. Record cost of goods sold for 2017.

In 2016, the Best Diamond Company Purchased Mineral Rights for a Diamond