A coal company invests $15 million in a mine estimated to have 20 million tons of coal and no salvage value.It is expected that the mine will 1.year, 1,000,000 tons of coal are extracted and sold.What is the depletion expense for the
First year?

Question

Quizplus · Accepted Answer

The depletion expense is calculated by dividing the total cost of the mine ($15 million) by the total estimated tons of coal (20 million tons) to get the cost per ton, which is $0.75 per ton. For the first year, with 1,000,000 tons extracted, the depletion expense is 1,000,000 tons * $0.75/ton = $750,000.

A Coal Company Invests $15 Million in a Mine Estimated