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 estimated that Santa Fe will recover 5,000 pounds of turquoise. During the past several years, 4,000 pounds were extracted. During the current year, Santa Fe extracted 1,500 pounds of turquoise, whichit sold for $250,000. What is Santa Fe's cost depletion expense for the current year?
A) $190,000
B) $60,000
C) $90,000
D) $160,000
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The cost depletion expense is calculated by dividing the total cost by the estimated total pounds and then multiplying by the pounds extracted in the current year: ($300,000 / 5,000 pounds) * 1,500 pounds = $90,000.

Santa Fe Purchased the Rights to Extract Turquoise on a Tract