Skyline Mine, Inc., acquired a mineral deposit for $12,000,000 in 2010. Geologists estimate the deposit contains 2,000,000 tons of ore. During 2010 and 2011, Skyline Mine, Inc. removed 610,000 tons and 480,000 tons of ore, respectively. The balance in the Accumulated Depletion account for the mineral deposit on December 31, 2011, will be:

Question

Quizplus · Accepted Answer

First, we need to calculate the depletion rate, which is the cost of the resource divided by the estimated tons of ore, or $12,000,000 ÷ 2,000,000 tons = $6 per ton.
To find the depletion expense, we multiply the depletion rate by the tons of ore removed each year:
2010 depletion expense: $6 x 610,000 tons = $3,660,000
2011 depletion expense: $6 x 480,000 tons = $2,880,000
Then, we can calculate the balance in the Accumulated Depletion account by subtracting the total depletion expense from the initial cost of the resource:
Accumulated Depletion balance = $12,000,000 - $3,660,000 - $2,880,000 = $6,460,000
Therefore, the correct answer is C.