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19 October, 08:19

On July 23 of the current year, Dakota Mining Co. pays $6,492,240 for land estimated to contain 9,144,000 tons of recoverable ore. It installs and pays for machinery costing $1,280,160 on July 25. The company removes and sells 468,250 tons of ore during its first five months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine's depletion as the machinery will be abandoned after the ore is mined.

Prepare entries to record the following: (a) To record the purchase of the land. (b) To record the cost and installation of machinery.

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  1. 19 October, 11:42
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    a. Debit Land accounts $6,492,240

    Credit Cash account $6,492,240

    Being entries to record the purchase of land

    and for the payment and installation of machinery,

    b. Debit Machinery account (fixed asset) $1,280,160

    Credit Cash accounts $1,280,160

    Being entries to record the purchase and installation of machinery

    Explanation:

    When an asset is purchased with cash, the entries required are debit asset and credit cash. Such asset includes land, equipment, building, mines, inventory etc.

    As such to record the purchase of a land,

    Debit Land accounts

    Credit Cash account

    and for the payment and installation of machinery,

    Debit Machinery account (fixed asset)

    Credit Cash accounts
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