Fulton Sand and Gravel paid $800,000 to acquire 1,200,000 cubic yards of sand r e serves. The following statements model reflects Fulton’s financial condition just prior to purchasing the sand reserves. The company extracted 650,000 cubic yards of sand in year 1 and 450,000 cubic yards in year 2.
a. Compute the depletion charge per cubic yard.
b. Record the acquisition of the sand reserves and the depletion expense for years 1 and 2 in a financial statements model like the preceding one.
c. Prepare the general journal entries to record the depletion expense for years 1 and 2.