Barton Corporation acquires a coal mine at a cost of $1,800,000. Intangible development costs total $360,000. After extraction has occurred, Barton must restore the property (estimated fair value of the obligation is $180,000), after which it can be sold for $210,000. Barton estimates that 5,000 tons of coal can be extracted. What is the amount of depletion per ton?

Question

Quizplus · Accepted Answer

Total cost of the mine = $1,800,000 + $360,000 + $180,000 = $2,340,000

Depletion base = 5,000 tons

Depletion per ton = (Total cost - Estimated residual value) / Depletion base = ($2,340,000 - $210,000) / 5,000 = $426.

Barton Corporation Acquires a Coal Mine at a Cost of $1,800,000