On April 1, 2019, CanAm Company purchased a copper mine at a cost of $14,000,000. The mine was estimated to contain 1,000,000 tons of ore and to have a residual value of $4,000,000 after mining operations are completed. During the year, 250,000 tons of ore were removed from the mine.
On December 31, 2019, the book value of the mine is:

Question

Quizplus · Accepted Answer

The depletion cost per ton is calculated as ($14,000,000 - $4,000,000) / 1,000,000 tons = $10 per ton. For 250,000 tons, the depletion is 250,000 tons * $10 = $2,500,000. The book value is $14,000,000 - $2,500,000 = $11,500,000.

On April 1, 2019, CanAm Company Purchased a Copper Mine