On April 2, 2011, Mitzu Mining Co. pays $3,920,000 for an ore deposit containing 1,400,000 tons. The

Question:

On April 2, 2011, Mitzu Mining Co. pays $3,920,000 for an ore deposit containing 1,400,000 tons. The company installs machinery in the mine costing $210,000, with an estimated seven year life and no . The machinery will be abandoned when the ore is completely mined. Mitzu began mining on May 1, 2011, and mined and sold 178,200 tons of ore during the remaining eight months of 2011. Prepare the December 31, 2011, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine’s depletion.
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...