Exercise $9\mathrm{.}11($Algo$)$ Depletion of Natural Resources $($LO$9-7)$

Salter Mining Company purchased the Northern Tier Mine for $$23$ million cash. The mine was estimated to contain $2\mathrm{.}4$ million tons of

ore and to have a residual value of $$1\mathrm{.}7$ million.

During the first year of mining operations at the Northern Tier Mine, $65,000$ tons of ore were mined, of which $52,000$ 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$)?$