Rick Corporation purchased a vein of coal ore for $5,250,000. It is estimated that 30,000,000 tons of ore are available to be extracted. The residual value is determined to be $250,000. The estimated depletion expense for this year's extraction of 2,750,000 tons of ore (rounded to the nearest dollar) is:

Question

Quizplus · Accepted Answer

The depletion expense is calculated by subtracting the residual value from the purchase price, then dividing by the total tons available, and finally multiplying by the tons extracted this year. So, $(5,250,000 - 250,000) / 30,000,000 * 2,750,000 = 481,250$.

Rick Corporation Purchased a Vein of Coal Ore for $5,250,000