Question

A coal mine cost $ 1,003,000 and is estimated to hold 60,000 tons of coal. There is no residual value. During the first year of​ operations, 16,000 tons are extracted and sold. Calculate depletion expense for the first year.​ (Round any intermediate calculations to the nearest​ cent.)

A.

$200,600

B.

$100,300

C.

$150,450

D.

$267,520

Answer 1

Answer: The correct answer is D i.e. $267,520

Depletion expense per ton = Acquisition cost / Expected total tons of extraction
Depletion expense per ton = $1,003,000 / 60,000
Depletion expense per ton = $16.72

Depletion expense for first year = Depletion expense per ton * Tons of extraction during first year
Depletion expense for first year = $16.72 * 16,000
Depletion expense for first year = $267,520