Question
In: Accounting
Salter mining Company purchased the Northern Tier Mine for $42 million cash. The mine was estimated...
Salter mining Company purchased the Northern Tier Mine for $42
million cash. The mine was estimated to contain 9.7 million tons of
ore and to have a residual value of $1.1 million. During the first
year of mining operations at the Northern Tier Mine, 60000 tons of
ore were mined of which 14000 tons were sold
a) preys journal to record depletion during the year
B) Show how the Northern Tier Mine and it’s accumulated
depletion would appear in Salter Mining Company balance sheet after
the first j of operations
Solutions
Expert Solution
| CALCULATION OF THE DEPLETION PER TONS | |||||
| Purchase Cost of Mine = | $ 4,20,00,000 | ||||
| Less: Residual Value | $ 11,00,000 | ||||
| Net Value for Depletion = | $ 4,09,00,000 | ||||
| Total expected production | 97,00,000 | Units | |||
| Depreciation per Tone = | $ 4.22 | Per Ton | |||
| (40,900,000 / 9,700,000 Tons) | |||||
| CALCULATION OF THE DEPLETION | |||||
| Years | Units of Activity | X Depletion per tons | = Annual Value of Depletion | Accumulated Depletion | Book Value |
| YeaR 1 | 60,000 | $ 4.22 | $ 2,52,990 | $ 2,52,990 | $ 4,17,47,010 |
| Answer = a) | |||||
| Record the depletion for the year 1 | |||||
| Journal Entries | |||||
| Date | Account Title and explanation | Debit | Credit | ||
| Year 1 | Depletion | $ 2,52,990 | |||
| To Accumulated Depletion | $ 2,52,990 | ||||
| (To Record the Depletion of the year) | |||||
| Answer B) | |||||
| SALTER MINING COMPANY | |||||
| PARTIAL BALANCE SHEET | |||||
| Northern Tier Mine | $ 4,20,00,000 | ||||
| Less: Accumlated Depletion | $ 2,52,990 | ||||
| $ 4,17,47,010 | |||||
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