The Company purchased a mining site for $558,306.00 on July 1. The company expects to mine...
The Company purchased a mining site for $558,306.00 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 94,754 tons will be recovered. The estimated residual value of the property is $40,849.00. During the first year the company extracted 6,676 tons of ore. What is the depletion expense for the first year?
Select the correct answer.
$36,458.02
$51,745.70
$39,336.08
$40,849.00
Homework Answers
| Correct option is: a. $36,458.02 | |||
| Workings: | |||
| Depletion Cost per unit | = | (Cost of the asset - Resale value) / Estimated number of units | |
| = | ($558306 - $40849) / 94754 | ||
| = | $ 5.46 | per ton | |
| Depletion expense (First year) | = | Depletion Cost per unit X Number of units extracted | |
| = | $5.31 X 6676 tons | ||
| = | $ 36,458.02 | ||
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