Rick Corporation purchased a vein of coal ore for $3,500,000. It is estimated that 25,000,000 tons of ore are available to be extracted. The residual value is determined to be $150,000. The estimated depletion rate for each ton of ore (rounded to the nearest cent) is:

Question

Quizplus · Accepted Answer

The depletion rate is calculated by subtracting the residual value from the purchase price and then dividing by the total amount of resource available. Thus, ($3,500,000 - $150,000) / 25,000,000 tons = $0.134 per ton, which rounds to $0.14.

Rick Corporation Purchased a Vein of Coal Ore for $3,500,000