The Best Diamond Company purchased mineral rights on a diamond mine in 2014 for a price of $7,000,000.In addition to the purchase price,the Best Diamond Company paid $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 fully depleted.During the first year of mining,Best Diamond extracted 50,000 carats of diamonds and in 2015,the company extracted 250,000 carats of diamonds.It is estimated that the mine contains 1,000,000 carats of diamonds.Assume the diamonds were not sold after they were extracted.
Required:
Prepare the journal entry without explanations to:
1.Record the purchase of the mineral rights with a note payable.
2.Record depletion for 2014.
3.Record depletion for 2015.

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The Answer of The Best Diamond Company purchased mineral rights on a diamond mine in 2014 for a price of $7,000,000.In addition to the purchase price,the Best Diamond Company paid $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 fully depleted.During the first year of mining,Best Diamond extracted 50,000 carats of diamonds and in 2015,the company extracted 250,000 carats of diamonds.It is estimated that the mine contains 1,000,000 carats of diamonds.Assume the diamonds were not sold after they were extracted.
Required:
Prepare the journal entry without explanations to:
1.Record the purchase of the mineral rights with a note payable.
2.Record depletion for 2014.
3.Record depletion for 2015.

The Best Diamond Company Purchased Mineral Rights on a Diamond