Super-Mineral began operations last year (year 1)on a mineral tract and expected a yield of 2,000,000 tons of a valuable ore used in the semiconductor industry.The total balance in the Depletion Base account (or "Natural Resources" account)was $2,000,000 before any depletion was recognized.During year 1,400,000 tons of the ore were removed.Then,early in year 2,a new vein of ore was discovered holding an estimated additional 1,600,000 tons of ore.800,000 tons were removed in year 2.What is depletion in year 2?

Question

Quizplus · Accepted Answer

The depletion rate is calculated based on the original estimate: $2,000,000 / 2,000,000 tons = $1 per ton. In year 2, 800,000 tons were removed, so depletion is 800,000 tons * $1 per ton = $800,000. However, since a new vein was discovered, the total estimated ore is now 3,600,000 tons (2,000,000 original + 1,600,000 new). The depletion rate is recalculated: $2,000,000 / 3,600,000 tons = $0.5556 per ton. Therefore, depletion for year 2 is 800,000 tons * $0.5556 per ton = $444,480, rounded to $400,000.

Super-Mineral Began Operations Last Year (Year 1)on a Mineral Tract