Santa Fe purchased the rights to extract turquoise on a tract of land over a five-yearperiod. Santa Fe paid $300,000 for extraction rights. A geologist estimates that Santa Fe will recover 5,000 pounds of turquoise. During the current year, Santa Fe extracted 1,500 pounds of turquoise, which it sold for $200,000. What is Santa Fe's cost depletionexpense for the current year?
A) $110,000
B) $90,000
C) $300,000
D) $60,000
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

Cost depletion expense per unit = ($300,000/5,000 pounds) = $60/pound
Cost depletion expense for the current year = 1,500 pounds x $60/pound = $90,000. Therefore, B is the correct answer.

Santa Fe Purchased the Rights to Extract Turquoise on a Tract