The Weber Company purchased a mining site for $1,750,000 on July 1, 2014. The company expects to mine ore for the next 10 years and anticipates that a total of 400,000 tons will be recovered. The estimated residual value of the property is $150,000. During 2014 the company extracted 6,500 tons of ore. The depletion expense for 2014 is
A) $17,500
B) $16,000
C) $26,000
D) $15,000

Question

Quizplus · Accepted Answer

First, we need to calculate the depletion rate per ton. 
Depletion rate per ton = (Purchase price - Residual value) / Estimated total tons 
Depletion rate per ton = ($1,750,000 - $150,000) / 400,000 tons = $4.25 per ton

For 2014, the depletion expense would be: 
Depletion expense = Depletion rate per ton x Tons extracted in 2014 
Depletion expense = $4.25 per ton x 6,500 tons = $27,625

However, we need to adjust for the partial year by using a proportion of the full year amount: 
Depletion expense = $27,625 x (6/12) = $13,812.50

Therefore, the closest answer choice is C) $26,000.

The Weber Company Purchased a Mining Site for $1,750,000 on July