A drilling company purchased a mining site for $500,000 on July 1, 2012. The company expects to mine ore for the next 10 years and anticipates that a total of 100,000 tons will be recovered. During 2012 the company extracted 6,500 tons of ore. The depletion expense for the year 2012 is:
A) $37,700.
B) $42,000.
C) $32,500.
D) $27,300.

Question

Quizplus · Accepted Answer

Depletion expense per unit = ($500,000 / 100,000 tons) = $5 per ton

Depletion expense for 2012 = (6,500 tons * $5 per ton) = $32,500

A Drilling Company Purchased a Mining Site for $500,000 on July