Asked by Claire Fledderman on Jul 11, 2024
Verified
A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.The depletion expense per ton of ore is:
A) $0.75.
B) $0.625.
C) $0.875.
D) $6.00.
E) $8.00.
Depletion Expense
an accounting and tax concept used to account for the reduction of a product's reserves, such as minerals, oil, and gas.
Salvage Value
The estimated resale or scrap value of an asset at the end of its useful life.
- Comprehend the reporting procedures for natural resources in finance and assess depletion costs.
Verified Answer
TR
Taylor RooneyJul 12, 2024
Final Answer :
B
Explanation :
Depletion Expense per ton of ore = (Cost of land - Salvage value) / Estimated tons of ore
= ($1,500,000 - $250,000) / 2,000,000
= $0.625 per ton of ore.
= ($1,500,000 - $250,000) / 2,000,000
= $0.625 per ton of ore.
Learning Objectives
- Comprehend the reporting procedures for natural resources in finance and assess depletion costs.
Related questions
A Company Purchased a Tract of Land for Its Natural ...
Fortune Drilling Company Acquires a Mineral Deposit at a Cost ...
Natural Resources Are ...
The Process of Writing Off a Natural Resource Is ...
Describe the Accounting for Natural Resources,including Their Acquisition,cost Allocation,and Account ...