In 2013,Pauley Company paid $1,000,000 to purchase land containing a total estimated 160,000 tons of extractable mineral deposits.The estimated value of the property after the mineral has been removed is $200,000.Extraction activities began in 2014,and by the end of the year,20,000 tons had been recovered and sold.In 2015,geological studies indicated that the total amount of mineral deposits had been underestimated by 25,000 tons.During 2015,30,000 tons were extracted,and 28,000 tons were sold.What is the depletion rate per ton (rounded to the nearest cent)in 2015?

Question

Quizplus · Accepted Answer

The depletion rate per ton is calculated by dividing the depreciable cost by the total estimated extractable tons. The depreciable cost is the purchase price minus the residual value ($1,000,000 - $200,000 = $800,000). The revised total estimated extractable tons is 185,000 (160,000 + 25,000). Therefore, the depletion rate per ton is $800,000 / 185,000 = $4.32.

In 2013,Pauley Company Paid $1,000,000 to Purchase Land Containing a Total