Question

PLEASE NOTE: THE ANSWER IS NOTE THAT 1,634,248 FOR PART A

Salter Mining Company purchased the Northern Tier Mine for $68 million cash. The mine was estimated to contain 3.27 million tons of ore and to have a residual value of $1.2 million. During the first year of mining operations at the Northern Tier Mine, 80,000 tons of ore were mined, of which 14,000 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.

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet. For detailed answer refer to the supporting sheet.

Answer - Part 1) = Firstly we have to calculate the depletion expense for the year = (cost-salvage value / estimated extraction * current year extraction = (68000000-1200000)/3270000*80000 = $1634251 Debit - Journal Entry For Depletion # Sr. No. Account Title and Explanation 1 Depletion expense Accumulated Depletion - Tier Mine (To record depletion expense) Credit 1634251 1634251 O Nm 4 Part 2) 5 presentation in Company Balance Salter Mining Company Partial Balance Current Non Current Assets Tier Mine Less Accumulated Depreciation Tier Mine 68000000 1634251 6 6365749

Answer 2

Part B answer is wrong.  The Answer of part B is not the amount you get in part A  (Note the title of the question.) 

Assuming the amount mined vs what was sold, is part of the problem here? 

Answer 3

Please note in Part B ( or Part 2)   you subtract or put in ( )'s to tell the sheet to remove it from the total, else it will add by default