A coal company invests $ 12 million in a mine estimated to have 20 million tonnes of coal and no residual value. It is expected that the mine will be in operation for 5 years. In the first year, 1,000,000 tonnes of coal are extracted and sold. What is the depreciation included in cost of goods sold for the first year?
A) $ 600,000
B) $ 240,000
C) $ 60,000
D) cannot be determined from the information provided

Question

Quizplus · Accepted Answer

The depreciation per tonne is $12 million / 20 million tonnes = $0.60 per tonne. For 1,000,000 tonnes extracted, the depreciation is 1,000,000 tonnes * $0.60 = $600,000.

A Coal Company Invests $ 12 Million in a Mine