Chapter 9, Problem 11E

a)

To determine

Prepare a journal entry to record depletion during the year.

b)

To determine

Show the way that the Northern Tier Mine, and its accumulated depletion, would appear in SM Company’s balance sheet after the first year of operations.

c)

To determine

Explain whether the entire amount of depletion computed in part (a) is deducted from revenue in the determination of income for the year or not.

d)

To determine

Explain the way that the journal entry in part (a) affects the company’s current ratio. Elaborate whether the activities summarized in this entry do make the company any more or less liquid.