A coal mine was acquired for $2,000,000. No salvage value was expected and the number of tons of coal is estimated to be 1,000,000 tons. During for first year, 100,000 tons of coal was mined and sold. The first year depletion expense is:

Question

Quizplus · Accepted Answer

The depletion expense is calculated by dividing the cost of the mine by the estimated total tons of coal, then multiplying by the tons mined. ($2,000,000 / 1,000,000 tons) * 100,000 tons = $200,000.

A Coal Mine Was Acquired for $2,000,000