A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.The depletion expense per ton of ore is:
A)$0.75.
B)$0.625.
C)$0.875.
D)$6.00.
E)$8.00.

Question

Quizplus · Accepted Answer

Depletion expense per ton of ore = (Cost of land - Salvage value of land) / Estimated tons of ore

= ($1,500,000 - $250,000) / 2,000,000

= $1.25 / ton

However, the question asks for the depletion expense per ton of ore, not the cost. Therefore, we need to divide the result by the estimated tons of ore:

= $1.25 / ton ÷ 2

= $0.625 / ton

Therefore, the correct answer is option B.

A Company Purchased a Tract of Land for Its Natural