Which of the following is true of depletion recorded for natural resources?
A)It recognizes increases in market value with the passage of time.
B)It matches the cost of resources used up with the revenues that are earned.
C)It is also recorded on buildings and equipment used in extracting the resource.
D)It is determined by a method similar to declining balance depreciation.

Question

Quizplus · Accepted Answer

Depletion recorded for natural resources matches the cost of resources used up with the revenues that are earned. This is typically done using the units-of-production method, which considers the total cost of acquiring the resource and divides it by the estimated total number of units that can be extracted. As units are extracted and sold, the cost of those units is matched with the revenue earned from their sale. Choice A is incorrect because depletion does not recognize increases in market value over time. Choice C is incorrect because depletion is only recorded for natural resources, not buildings and equipment. Choice D is incorrect because declining balance depreciation is a method used for depreciating fixed assets, not for depleting natural resources.

Which of the Following Is True of Depletion Recorded for Natural