Early in the current year,Amazon Co.purchased the Rio Silver Mine at a cost of $30,000,000.The mine was estimated to contain 400,000 tons of ore and to have a residual value of $7,500,000 after mining operations are completed.During the year,115,000 tons of ore were removed from the mine.At year-end,the book value of the mine is:
A)$22,500,000.
B)$6,468,750.
C)$23,531,250.
D)$30,000,000.

Question

Quizplus · Accepted Answer

The book value of the mine at year-end is calculated by subtracting the depletion expense from the original cost. The depletion expense is calculated based on the number of tons of ore removed. The cost to allocate is $30,000,000 - $7,500,000 = $22,500,000. The depletion per ton is $22,500,000 / 400,000 tons = $56.25 per ton. For 115,000 tons removed, the depletion expense is 115,000 tons * $56.25 = $6,468,750. Therefore, the book value at year-end is the original cost of $30,000,000 minus the depletion expense of $6,468,750, which equals $23,531,250.

Early in the Current Year,Amazon Co