Question

A coal mine cost $ 1 comma 004 comma 000 and is estimated to hold 59 comma 000 tons of coal. There is no residual value. During the first year of​ operations, 12 comma 000 tons are extracted and sold. Calculate depletion expense for the first year.

Answer 1

$204, 203.39

Step-by-step explanation:

Depletion is expensing the cost of extracting natural resources.

Depletion expense = Cost × (actual natural resources extracted / total estimated natural resources to be extracted)

$1,004,000 × (12,000 / 59,000) = $204, 203.39