Reference no: EM132537292

Question - Described below are certain transactions of the Bell Company for 2020. Bell uses a perpetual inventory system.

A. June 10, the company purchased the rights to natural resources on land owned by Jay Company for $60,000. Bell's geology team believes they can successfully remove 600,000 pounds of ore from the mine.

B. July 1, the company purchased a machine for $70,000 from Myers Company, paying $20,000 in cash and giving a two-year, 8% interest bearing note for the balance to Myers. The machine is to be used to facilitate the mining of the ore deposit on Jay Company's land. The machine will become an integral part of the mine and will be abandoned when the ore deposit is fully depleted.

C. Bell has agreed to pay Jay Company a royalty of $2.00 per pound of ore removed.

D. Bell must also recover the land to a useful purpose when the mining efforts are completed. This is expected to cost $20,000. Because Bell did not buy the land there is no cost recovery when the mine is abandoned.

E. Bell incurred exploration and development costs of $310,000, for the mining operation.

F. October 31, the company borrowed $230,000 by issuing an interesting bearing 9%, ninety day, note to the First State Bank to finance the mining operations.

G. On December 15, received utility bills totaling $5,245.00 related to mine operations that are due January15.

H. From November 1 until year end Bell removed 7,000 pounds of ore from the mine. They have a contract to sell and deliver 6000 pounds of the ore in January to an ore purifying firm for $145 per pound.

INSTRUCTIONS -

(i) Prepare the journal entries necessary to record the transactions above using appropriate dates.

(ii) Prepare the adjusting entries necessary at December 31, in order to properly record adjusting journal entries. Where necessary round to the nearest whole dollar.