On January 1, 2002, Castle Investment Corporation purchased a coal mine for cash, having taken into consideration the favorable tax consequences and the inevitable energy crunch in the future.Castle paid $800,000 for the mine. Shortly before the purchase, an engineer estimated that there were 80,000 tons of coal in the mine.
1. Record the purchase of the mine on January 1, 2002.
2. Record the depletion expense for 2002, assuming that 20,000 tons of coal were mined during the year.
3. Assume that on January 1, 2003, the company received a new estimate that the mine now contained 120,000 tons of coal. Record the entry (if any) to show the change in estimate.
4. Record the depletion expense for 2003, assuming that another 20,000 tons of coal were mined.