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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.
-During 2010, Eldred Corporation acquired a mineral mine for $1,500,000 of which $200,000 was ascribed to land value after the mineral has been removed.Geological surveys have indicated that 10 million units of the mineral could be extracted.During 2010, 1,500,000 units were extracted and 1,200,000 units were sold.What is the amount of depletion expensed for 2010?

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Quizplus · Accepted Answer

Depletion rate per unit = ($1,500,000 - $200,000) / 10,000,000 units = $0.13 per unit
Depletion expense for 2010 = 1,500,000 units x $0.13 = $195,000. Option D is incorrect because it is not the correct calculation. Options A and C are incorrect because they are using the wrong depletion rate.

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