If a mining company extracts 1,500,000 tons in a period but only sells 1,200,000 tons,

Question

Quizplus · Accepted Answer

Depletion expense should be recognized on the amount of minerals extracted and sold, which in this case is 1,200,000 tons. The remaining 300,000 tons should be recorded as inventory or as a reduction of the cost of the mineral reserves until they are sold. There is no need to set up a separate Accumulated Depletion account for the 300,000 tons not sold.

If a Mining Company Extracts 1,500,000 Tons in a Period