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On January 1, 2011, Edmondton Inc.purchased equipment with a cost of €4,500,000, a useful life of 12 years and no salvage value.The Company uses straight-line depreciation.At December 31, 2011, the company determines that impairment indicators are present.The fair value less cost to sell the asset is estimated to be €3,850,000.The asset's value-in-use is estimated to be €3,500,000.There is no change in the asset's useful life or salvage value.
-In January, 2010, Yoder Corporation purchased a mineral mine for $3,400,000 with removable ore estimated by geological surveys at 2,000,000 tons.The property has an estimated value of $200,000 after the ore has been extracted.The company incurred $1,000,000 of development costs preparing the mine for production.During 2010, 500,000 tons were removed and 400,000 tons were sold.What is the amount of depletion that Yoder should expense for 2010?

Question

Quizplus · Accepted Answer

Depletion per unit = ($3,400,000 - $200,000) / 2,000,000 = $1.60
Total depletion for 500,000 tons = $1.60 x 500,000 = $800,000
Since 400,000 tons were sold, depletion expense is $800,000 x (400,000/500,000) = $640,000.
Therefore, the answer is option C.

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