Salter Mining Company purchased the Northern Tier Mine for $79 million cash. The

Q: Salter Mining Company purchased the Northern Tier Mine for $79 million cash. The

a. To record depletion on the Northern Tier Mine: 85,000 tons mined × $10.16 per ton [($79,000,000 – $9,200,000) / 6,870,000 tons = $10.16 per ton]. b. Mining property: Northern Tier Mine $79,000,000 Less: Accumulated depletion 863,610 Total $78,136,390 Account Titles Debit Credit Inventory $863,610 Accumulated depletion: Northern Tier Mine $863,610

ID: 2599498 • Letter: S

Question

Salter Mining Company purchased the Northern Tier Mine for $79 million cash. The mine was estimated to contain 6.87 million tons of ore and to have a residual value of $9.2 million.
During the first year of mining operations at the Northern Tier Mine, 85,000 tons of ore were mined, of which 10,000 tons were sold.

a. Prepare a journal entry to record depletion during the year.

b. 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.

Explanation / Answer

To record depletion on the Northern Tier Mine: 85,000 tons mined × $10.16 per ton [($79,000,000 – $9,200,000) / 6,870,000 tons = $10.16 per ton].

b. Mining property: Northern Tier Mine $79,000,000
Less: Accumulated depletion 863,610
Total $78,136,390

Account Titles Debit Credit Inventory $863,610 Accumulated depletion: Northern Tier Mine $863,610

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