Salter Mining Company purchased the Northern Tier Mine for $48 million cash. The
ID: 2416510 • Letter: S
Question
Salter Mining Company purchased the Northern Tier Mine for $48 million cash. The mine was estimated to contain 6.65 million tons of ore and to have a residual value of $4 million.
During the first year of mining operations at the Northern Tier Mine, 55,000 tons of ore were mined, of which 18,000 tons were sold.
Prepare a journal entry to record depletion during the year.
Show how the Northern Tier Mine, and its accumulated depletion, would appear in Salter Mining Company's balance sheet after the first year of operations.
Salter Mining Company purchased the Northern Tier Mine for $48 million cash. The mine was estimated to contain 6.65 million tons of ore and to have a residual value of $4 million.
During the first year of mining operations at the Northern Tier Mine, 55,000 tons of ore were mined, of which 18,000 tons were sold.
Explanation / Answer
a.
depletion per 0.55 milion=($48 milion-$4Million)*0.55 million/6.5 million=$44 million*0.55 million/6.5 Milion=$3.723 million
b.
Salter Mining company
Balance sheet(Partial)
Transaction General journal Debit Credit 1 Inventory $3.723 million Accumulated depletion: Northern Tier Mine $3.723 millionRelated Questions
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