A company purchased a mineral deposit for $800,000.It expects this property to produce 1,200,000 tons of ore and to have a salvage value of $50,000.In the current year,the company mined and sold 90,000 tons of ore.Its depletion expense for the current period is equal to:
A)$15,000
B)$60,000
C)$150,000
D)$56,250
E)$139,500

Question

Quizplus · Accepted Answer

Depletion expense = (Cost of resource - Salvage value) / Total estimated units * Current period units
Depletion expense = ($800,000 - $50,000) / 1,200,000 * 90,000
Depletion expense = $56,250

A Company Purchased a Mineral Deposit for $800,000