Coal Factory, Inc., acquired a coal mine for $8,500,000 in 2011. Geologists estimate the deposit contains 2,125,000 tons of coal. Once the coal is mined, the asset will have no residual value. During 2011 and 2012, Coal Factory, Inc. mined 316,410 tons and 406,512 tons of coal, respectively. The balance in the intangible asset account for the coal on December 31, 2012, will be:
A) $2,891,688.
B) $4,885,390.
C) $5,608,312.
D) $8,500,000.

Question

Quizplus · Accepted Answer

The depletion expense is calculated by dividing the cost of the mine by the total estimated tons of coal, then multiplying by the tons mined. The balance is the original cost minus the accumulated depletion.