If a mining company extracts 1500000 tons in a period but only sells 1200000 tons
A) total depletion on the mine is based on the 1200000 tons.
B) depletion is recognized on the 1500000 tons extracted.
C) depletion is recognized on the 1200000 tons extracted and sold.
D) a separate accumulated depletion account is set up to record depletion on the 300000 tons extracted but not sold.

Question

Quizplus · Accepted Answer

Depletion is recognized on the total amount extracted (1500000 tons) from the mine, regardless of whether it has been sold or not. This is because depletion expense reflects the reduction in the natural resource's value due to its extraction, not its sale.

If a Mining Company Extracts 1500000 Tons in a Period