Salter Mining Company purchased the Northern Tier Mine for $23 million cash. The mine was estimated to contain 2.3 million tons of ore and to have a residual value of $1.9 million. During the first year of mining operations at the Northern Tier Mine, 70,000 tons of ore were mined, of which 56,000 tons were sold. Required: 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. c. What amount of depletion computed in part a will be deducted from revenue in the determination of income for the year? d. How will the journal entry in part a affect the company's current ratio (its current assets divided by its current liabilities)
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