Weber Company purchased a mining site for $1,750,000 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 400,000 tons will be recovered. The estimated residual value of the property is $150,000. During the first year, the company extracted 6,500 tons of ore. The depletion expense is
A) $17,500
B) $16,000
C) $26,000
D) $15,000

Question

Quizplus · Accepted Answer

Depletion expense = (Total cost - Residual value) / Total recoverable units

Total cost = Purchase price = $1,750,000
Residual value = $150,000
Total recoverable units = 400,000 tons

Depletion rate = (1,750,000 - 150,000) / 400,000 = $4.00 per ton

Depletion expense for the first year = 6,500 x $4.00 = $26,000.

Therefore, the correct choice is C.

Weber Company Purchased a Mining Site for $1,750,000 on July