Exhibit 11-04
Kieso Company purchased a tract of land for $4,500,000 in anticipation of extracting 1,425,000 tons of ore. The residual value of the land is expected to be $480,000. The company mines 125,000 tons of ore in the first year.
-Refer to Exhibit 11-04, what amount of depletion was recorded in that first year?

Question

Quizplus · Accepted Answer

The depletion cost per ton is calculated as (Cost - Residual Value) / Total tons of ore = ($4,500,000 - $480,000) / 1,425,000 = $4,020,000 / 1,425,000 = $2.82 per ton. For the first year, the depletion expense is 125,000 tons * $2.82 per ton = $352,500.

Exhibit 11-04 Kieso Company Purchased a Tract of Land for $4,500,000 in $4,500,000