On July 4, 2021, Wyoming Mining Company purchased the mineral rights to a granite deposit for $1,600,000.It is estimated that the recoverable granite will be 400,000 tons.During 2021, 100,000 tons of granite were extracted and 60,000 tons were sold.The amount of the depletion expense recognized for 2021 would be

Question

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To calculate depletion expense, we need to determine the depletion rate per ton of granite. This is calculated as the cost of the mineral rights ($1,600,000) divided by the estimated recoverable granite (400,000 tons), which gives us a depletion rate of $4 per ton.

The depletion expense for the year is then calculated by multiplying the depletion rate per ton by the amount of granite extracted during the year. In this case, 100,000 tons were extracted, so the depletion expense is 100,000 x $4 = $400,000.

However, we also need to consider that 60,000 tons were sold during the year. The cost of this sold granite needs to be recognized as a cost of goods sold expense, which reduces the amount of depletion expense.

The cost of the sold granite is calculated as 60,000 tons x $4 per ton = $240,000. This means that the depletion expense recognized for the year is the original depletion expense of $400,000 minus the cost of the sold granite of $240,000, which gives us a total depletion expense of $160,000. Therefore, the correct answer is option C.

On July 4, 2021, Wyoming Mining Company Purchased the Mineral