Santa Fe purchased the rights to extract turquoise on a tract of land over a five-year period. Santa Fe paid $300,000 for extraction rights. A geologist estimates that Santa Fe will recover 5,000 pounds of turquoise. During the current year, Santa Fe extracted 1,500 pounds of turquoise, which it sold for $200,000. What is Santa Fe's cost depletion expense for the current year?
A) $60,000.
B) $90,000.
C) $110,000.
D) $300,000.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The depletion expense is $90,000 ($300,000/5,000) × 1,500.

Santa Fe Purchased the Rights to Extract Turquoise on a Tract