Question

On March 31, 2011, M. Belotti purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway construction. The cost of the quarry rights was $164,000, with estimated salable rock of 20,000 tons.

During 2011, Belotti loaded and sold 4,000 tons of rock and estimated that 16,000 tons remained at December 31, 2011.
At January 1, 2012, Belotti estimated that 20,000 tons still remained.
During 2012, Belotti loaded and sold 8,000 tons.
Belotti would record depletion in 2012 of:
(A) $54,667. (B) $65,600. (C) $52,480. (D) $55,760.

Answer 1

Belotti would record depletion in 2012 of:

(C) $52,480.

Step-by-step explanation:

• The cost of the quarry rights was $164,000.

• Estimated salable rock of 20,000 tons

• Units Cost for Depletion : $ 8,20

During 2011, Belotti loaded and sold 4,000 tons, it means a depletion during 2011 of $32,800.

At December 2011 the monetary balance of the quarry was $131.200

At January 1, 2012, Belotti estimated that 20,000 tons still remained.

The new unit cost of the quarry is $6,56

During 2012, Belotti loaded and sold 8,000 tons, it means a depletion during 2012 of $52,480, 8,000 tons * $6,56 = $52,480