PZ Co.paid $9, 000 for some land that was expected to have 50, 000 units of a natural resource on it.Development costs amounted to $520.It was expected that the land would require $780 of reclamation costs after production.In the first year of mining, 5, 000 units of the natural resource were mined.At the beginning of the second year, it was estimated that only 40, 000 units of the natural resource remained and estimated reclamation costs should be increased to $960.In the second year, 8, 000 units were mined.What was the amount of depletion for the second year?
A)$1, 714
B)$1, 854
C)$1, 890
D)$2, 046

Question

Quizplus · Accepted Answer

Depletion per unit formula = (Cost of land + Development costs + Reclamation costs) / Estimated units of natural resource

(9000 + 520 + 780) / 50000 = $0.214/unit

Depletion for the first year = 0.214 x 5000 = $1070

Remaining units of natural resource after the first year = 50000 - 5000 = 45000

Revised estimated reclamation costs after the first year = $960

Depletion for the second year = 0.214 x 8000 = $1712

Depletion for the remaining natural resource after the second year = 0.214 x 40000 = $8560

Total depletion = $1070 + $1712 + $8560 = $11, 342

Therefore, the answer is C) $1,890.

PZ Copaid $9, 000 for Some Land That Was Expected to to Have