In 2014, Western Maryland Company paid $3,000,000 for a mining tract with reserves of 100,000 tons of ore, which the company planned to mine over a 20-year period. The company spent $500,000 developing the mine. Western plans to spend $200,000 for reclamation when mining has been completed, after which the land will have an estimated value of $600,000. In 2014, Western mined and sold 8,000 tons of ore. What depletion should Western record for the year?

Question

Quizplus · Accepted Answer

To calculate depletion, we need to first determine the depletion cost per ton:

Total acquisition and development cost = $3,500,000 ($3 million for the mining tract + $500,000 for development)

Depletion cost per ton = Total acquisition and development cost / Total estimated tons of ore = $3,500,000 / 100,000 tons = $35 per ton

Depletion expense for the year = Depletion cost per ton x Tons of ore mined and sold during the year

Depletion expense for the year = $35 x 8,000 tons = $280,000

Therefore, the answer is B.

In 2014, Western Maryland Company Paid $3,000,000 for a Mining