In 2010, Westmoreland 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.Westmoreland 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 2010, Westmoreland mined and sold 8, 000 tons of ore.What depletion should Westmoreland record for the year?

Question

Quizplus · Accepted Answer

First, we need to calculate the depletion rate per ton:

Depletion rate per ton = (Purchase price - Development costs - Estimated salvage value) / Total tons of ore
Depletion rate per ton = ($3,000,000 - $500,000 - $600,000) / 100,000 tons
Depletion rate per ton = $1,900 per ton

To calculate depletion for the year 2010, we need to multiply the depletion rate per ton by the number of tons of ore sold:

Depletion expense for the year = Depletion rate per ton x Tons sold in the year
Depletion expense for the year = $1,900/ton x 8,000 tons
Depletion expense for the year = $15,20000

Therefore, the depletion that Westmoreland should record for the year is $248,000 (option B).

In 2010, Westmoreland Company Paid $3, 000, 000 for a Mining