A coal mine cost $1,007,000 and is estimated to hold 56,000 tonnes of coal.There is no residual value.16,000 tonnes are extracted and sold during the first year of operations.Calculate depletion expense for the first year.

Question

Quizplus · Accepted Answer

Depletion expense is calculated based on the amount of coal extracted and sold.

Depletion Rate per tonne = (Cost of the mine - Residual Value) / Total estimated tonnes of coal
Depletion Rate per tonne = ($1,007,000 - $0) / 56,000 tonnes 
Depletion Rate per tonne = $18

Depletion Expense for the first year = Depletion Rate per tonne x Tonnes of coal extracted and sold in the first year 
Depletion Expense for the first year = $18 x 16,000 tonnes 
Depletion Expense for the first year = $287,714.29

Therefore, the correct answer is C.

A Coal Mine Cost $1,007,000 and Is Estimated to Hold