A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The residual value of the land is expected to be $250,000. The depletion expense per ton of ore is:
A) $0.75.
B) $0.625.
C) $0.875.
D) $6.00.
E) $8.00.

Question

Quizplus · Accepted Answer

Depletion expense per ton of ore can be calculated using the formula:

Depletion expense per ton of ore = (Cost of natural resources - Residual value)/Estimated total units of natural resource

Here,

Cost of natural resources = $1,500,000
Residual value = $250,000
Estimated total units of natural resource = 2,000,000 tons of ore

Depletion expense per ton of ore = ($1,500,000 - $250,000)/2,000,000 = $0.625 per ton of ore.

Therefore, the correct choice is B.

A Company Purchased a Tract of Land for Its Natural