A company purchased a mineral deposit for $800,000.It expects this property to produce 1,200,000 tons of ore and to have a salvage value of $50,000.In the current year,the company mined and sold 90,000 tons of ore.Its depletion expense for the current period equals:

Question

Quizplus · Accepted Answer

Depletion Expense = [(Cost - Salvage Value)/ Estimated Useful Life (in tons)] * Tons
Mined and Sold
Depletion Expense = [($800,000 - $50,000)/1,200,000] * 90,000 = $56,250

A Company Purchased a Mineral Deposit for $800,000