Question

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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

ekkarill92 answered 2 years ago
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