Cocke Mining Company purchases a gravel pit for $5,000,000.It estimates that 10,000,000 tons of gravel can be extracted over the pit's useful life.If 930,000 tons are extracted and sold during the first year,the entry to record the depletion expense is:
A) Depletion Expense - Gravel pit 465,000
Accumulated Depletion - Gravel pit 465,000
B) Depletion Expense - Gravel pit 116,250
Accumulated Depletion - Gravel pit 116,250
C) Depletion Expense - Gravel pit 232,500
Accumulated Depletion - Gravel pit 232,500
D) Depletion Expense - Gravel pit 348,750
Accumulated Depletion - Gravel pit 348,750

Question

Quizplus · Accepted Answer

The depletion expense is calculated by dividing the cost of the gravel pit by the total estimated tons of gravel, then multiplying by the tons extracted in the first year: ($5,000,000 / 10,000,000 tons) * 930,000 tons = $465,000.

Cocke Mining Company Purchases a Gravel Pit for $5,000,000